In August 2019, public accounting firm RSM US LLP agreed to pay $950,000
to settle SEC charges that it violated the agency’s auditor independence rules
by providing non-audit services to, or having an employment relationship with,
affiliates of at least 15 audit clients between 2014 and 2015. The SEC alleged
that RSM US and associated member firms of the RSM International network
provided non-audit services to affiliates of RSM US audit clients, which violated
independence rules. In addition to agreeing to pay the civil money penalty, RSM US
agreed to engage an independent consultant to evaluate existing quality controls for
complying with auditor independence requirements for non-audit services. RSM
issued a public statement in response to the settlement noting that the violations
related to deficiencies in its independence controls and that the SEC did not find
that the firm’s objectivity or impartiality were impaired.
- Prohibited Services and Relationships – According to the SEC order, RSM
provided prohibited non-audit services,3
including “corporate secretarial services,
payment facilitation, payroll outsourcing, loaned staff, financial information
system design or implementation, bookkeeping, internal audit outsourcing,
and investment adviser services,” to affiliates of audit clients during its work
on more than 100 audit reports between 2014 and 2015. Additionally, a tax
partner from RSM’s Australian member firm served on a voluntary basis as a
non-discretionary member of the board of an affiliate of an RSM audit client.
- Inadequate Independence Controls – The SEC order alleges that RSM failed
to detect certain of these independence violations until at least 2016 due to
deficiencies in its system of quality controls around auditor independence. For
example, certain RSM engagement teams failed to properly enter information
about client relationships in the firm’s central database, and some engagement
teams failed to utilize the database to identify affiliates of audit clients. In each
instance of RSM’s independence violations, the relevant audit engagement
teams were unaware of the prohibited non-audited services or relationships.
- Potential Audit Client Implications – The SEC order also finds that RSM’s
independence violations caused its audit clients to violate their obligations to
have their financial statements audited by independent public accountants. The SEC, however, has not to date filed any enforcement actions against these
clients, and it is not clear whether they would pursue such actions absent some
knowing involvement by the client in the violation or other aggravating factors.
The SEC’s settlement order with RSM can be found here.
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