SEC Cites ‘Harry Potter Fantasy,’ Presses Forward on Ernst Sanctions

The war of words between the Securities and Exchange Commission and Big Four firm Ernst & Young continues as the SEC has pledged to move forward with banning E&Y from accepting new audit clients for six months.

SEC lawyers are pushing for sanctions against E&Y as a result of independence issues related to the CPA firm’s relationship with software developer PeopleSoft in the late 1990s.

The SEC is likening E&Y’s defenses to the popular Harry Potter books and calling them "another work of fantasy, concealed in lawyerly bombast, but fantasy just the same."

"While the fun of Harry Potter is its other-world view, its power has been said to lie in the real-world truths it reveals," the SEC said. "By contrast, while the interest of E&Y's brief is its apparent real-world view, its power lies in the truths it conceals."

Earlier this month, E&Y lawyers called the SEC’s allegation and suggested new client ban “outrageous,” and vowed to fight the accusations.

The SEC, in its quest to help restore investor confidence, has indicated that a strict penalty against E&Y is in order. "These remedies are necessary to reassure the investing public, whose confidence in the financial markets, in no small measure, depends on the perceived independence of public company auditors," the SEC brief said.

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Upcoming CPE Webinars

Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.
Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.