Ernst & Young to settle U.S. civil charges over lobbying

Mon Jul 14, 2014 3:47pm EDT
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By Sarah N. Lynch

WASHINGTON (Reuters) - Accounting firm Ernst & Young will pay $4 million to settle civil charges that it violated auditor independence rules when one of its units lobbied congressional staff on behalf of its audit clients, U.S. regulators said Monday.

The Securities and Exchange Commission said the firm is settling the case without admitting or denying the charges.

A spokesman for Ernst & Young said on Monday that the firm is happy to put the matter behind it and that auditor independence is "of paramount importance."

"We regret these instances that arose many years ago," said John La Place. "In 2012, Ernst & Young voluntarily decided to cease performing lobbying work for SEC registrant audit clients."

SEC rules prohibit auditors from serving as "advocates" for audit clients because doing so may cloud their independence when they review companies' financial statements.

The auditor independence rules were beefed up more than a decade ago after the Enron-era accounting scandals.

“Auditor independence is critical to the integrity of the financial reporting process," said Scott Friestad, an associate director in the SEC's enforcement division.

“Ernst & Young engaged in lobbying activities that constituted improper advocacy and clearly violated the rules," he added.   Continued...

The logo of Ernst & Young is seen at their headquarters in New York December 20, 2010.  REUTERS/Lucas Jackson