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From Securities Regulation Daily, June 1, 2018

Former auditor pleads guilty to submitting false documents in SEC investigation

By John Filar Atwood

A former auditor and owner of a registered public accounting firm has pleaded guilty to knowingly submitting falsely backdated documents to the SEC during a Commission investigation into his auditing practices. The charge carries a maximum penalty of 20 years in prison, but sentencing will be determined at a later date (U.S. v Johnson, May 31, 2018).

The DOJ said in a press release that, in response to SEC document requests, the auditor created and sent unsigned versions of the documents at issue to two of the companies he had audited, and obtained backdated signatures on them. He then submitted the backdated documents to the Commission as though they were authentic and lied about his submission of the false documents during sworn testimony.

The auditor was registered with the PCAOB and audited the financial statements of publicly traded companies in order to determine whether they were accurate, truthful, and complete in accordance with U.S. GAAP. Through his company, the auditor reviewed the 2013 year-end financial statements of several companies and released the related audit reports in April 2014.

SEC document request. In August 2014, the SEC’s Division of Enforcement sent a voluntary document request to the auditor indicating that the staff was conducting a nonpublic fact finding inquiry. The enforcement staff requested that the auditor provide certain categories of backup documentation and work papers concerning his audits. The SEC followed up its voluntary request with a subpoena.

The auditor provided documents in response to the document request in September 2014 and additional documents responsive to both the voluntary request and the subpoena in November 2014. The documents were supposed to have been those produced in the course of conducting the April 2014 audit reports, but some of the requested documentation did not exist.

Creating false documents. Rather than admit to the Commission that the documents did not exist, the auditor created certain of the requested documents and sent unsigned copies of the documents to officials at the relevant client companies. He requested that the clients sign the documents and backdate them to a date consistent with the auditor having obtained the signed documents during the course of his audit. Upon receiving the signed and backdated documents, the auditor submitted them to the SEC as though they were authentic.

In March 2015 sworn testimony before the SEC, the auditor lied repeatedly under oath concerning his submission of the backdated documents. The SEC’s inquiry resulted in an SEC order sanctioning the auditor for committing securities fraud and improper professional conduct. The Commission assessed financial penalties and barred the auditor from appearing or practicing before the SEC as an accountant.

The case is No. 18-CR-383.

Attorneys: Martin Bell, U.S. Attorney's Office, for the United States.

MainStory: TopStory AccountingAuditing Enforcement NewYorkNews

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