In another shot across the bow, the SEC has charged two companies’ Audit Committee Chairs for failing to act on obvious red flags of fraudulent accounting and financial reporting. Both of the companies were primarily operating in China but the Audit Committee Chairs are US citizens.
While some might be inclined to discount this warning signal because of the China connection, Daniel Goelzer, a partner with law firm Baker & McKenzie and former SEC general counsel and former member of the Public Company Accounting Oversight Board suggests otherwise.
“During the past year, the SEC chair and staff have announced a new focus on gatekeepers, such as attorneys, accountants, and directors, and these cases seem to illustrate how the Commission intends to apply its gatekeepers program to audit committee members,”
Coming on the heels of the SEC charging company executives for false certification (click here), this seems to signal the SEC’s serious intent to enforce its rules rather than look the other way.
Below are links to a Compliance Week article and two SEC documents describing the circumstances and charges of the two cases mentioned.
Agfeed’s SEC Complaint: http://www.sec.gov/litigation/complaints/2014/comp-pr2014-47.pdf
L&L Energy Cease and Desist Order: http://www.sec.gov/litigation/admin/2014/34-71824.pdf