May 16, 2023
SEC Enforcement: Accounting Actions Up But Still Below Pre-Pandemic Levels
According to this recent Cornerstone Research report, SEC & PCAOB accounting and auditing enforcement actions increased by 55% in 2022 from 2021, but remained below pre-pandemic levels. Here’s an excerpt with some of the specifics:
Actions referring to announced restatements and/or material weaknesses in internal control climbed to the highest level in recent years, and actions involving alleged violations of Section 304 of the Sarbanes-Oxley Act of 2002 (the so-called “clawback” provision) increased sharply.
Total monetary settlements dropped substantially in FY 2022 due, in part, to the absence of any very large settlements (i.e., those over $1 billion). The SEC acknowledged that 24% of the 90 respondents who settled in FY 2022 offered cooperation and/or undertook remedial efforts, up from 20% in FY 2021.
The most common allegations in actions initiated in FY 2022 related to a company’s revenue recognition and internal control over financial reporting. One or both violations were alleged in 63% of FY 2022 actions.
– Meredith Ervine