SEC Fines another CPA Firm

[Lee B]

"The Securities and Exchange Commission (SEC) fined RSM US $3.75 million on Sept. 30 and charged the audit firm with improper professional conduct for failing to properly audit LED lighting solutions provider Revolution Lighting Technologies Inc.’s financial statements over a four-year period when the company was violating accounting principles by inflating revenue with bill and hold sales. 

According to the SEC’s order, RSM’s planning and supervision of the audit, as well as the evaluation of audit results and review of Revolution’s disclosures, all failed to adhere to the Public Company Accounting Oversight Board’s auditing and quality control standard."

Really, what's the problem? This is what every CFO of a Publicly Traded Corporation does,

they manage their Quarterly Sales and Earning Reports

[Patrick Michael]

I used to work for a company that was self insured for workers comp.  Every quarter they would take a look and if it was a good quarter they would over accrue for WC claims and if it was a bad quarter they would under accrue.  I questioned the CFO about this and he said it was to smooth out the earnings. He got real made when I asked which GAAP pronouncement allowed the smoothing of earnings.  The auditors finally put their foot down and demanded an actuarial study and found they were over accrued by almost 100% and made them bring it back in over the next year.  And the real kicker was our bonus was based on net profit, so when they over accrued our bonus suffered but when they were forced to bring it back in, they excluded that amount from the bonus calculation.  

[mcbreck]

2 hours ago, Patrick Michael said:

And the real kicker was our bonus was based on net profit, so when they over accrued our bonus suffered but when they were forced to bring it back in, they excluded that amount from the bonus calculation.  

Ouch that's horrific. When I started working my dad lectured me that if you ever go into a partnership with someone, demand all partners must share equally in ALL corporate benefits. He had a friend who became partner with a group of guys where one guy was 50%, the rest all added up to 50%. Every December the major partner gave himself a major bonus that cut distributive profits to almost nothing. There was nothing the other partners could do about it but quit.