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BDO USA is paying U.S. $2.1 million to settle Securities and Exchange Commission charges that it dismissed red flags and issued false and misleading unqualified audit opinions about the financial statements of U.S. recruiting company General Employment Enterprises.
The SEC also charged five of the firm's partners for their roles in the deficient audits, and filed fraud charges against the client company's former chairman of the board and majority shareholder Stephen Pence, a former U.S. attorney and former lieutenant governor of Kentucky.
BDO says it was just as much misled by management as the general public was. All the same, it agreed to admit wrongdoing, pay disgorgement of its audit fees and interest totaling approximately $600,000 (all f igures U.S.), and pay a $1.5 million penalty in addition to complying with recommendations related to its quality controls. The five partners also agreed to settle the charges against them. Two former CEOs of General Employment have said they would settle separate charges, while litigation continues against Pence.
In a statement released Sept. 9, BDO said it is "committed to complying with all provisions of the agreement as it continues to perform high quality audits for public companies." It added that "BDO USA places signif icant value on maintaining positive relationships with its regulators and is pleased to resolve these claims with the SEC relating to BDO's 2009-2010 audits of General Employment Enterprises (GEE)."
"Audit firms must train their audit and national office professionals not only to recognize red flags but also to have the resolve to refuse signing offon an audit if there are unresolved material...