May 6, 2024

Enforcement: Bye-Bye BF Borgers

On Friday, the SEC’s Division of Enforcement announced enforcement proceedings against the BF Borgers CPA PC accounting firm and its sole partner, Benjamin Borgers, for alleged “deliberate and systemic failures” to comply with PCAOB standards in audits and reviews incorporated in more than 1,500 SEC filings from January 2021 through June 2023. As this excerpt from the SEC’s press release illustrates, the allegations are jaw-dropping:

The SEC’s order finds that, among other things, the Respondents failed to adequately supervise and review the work of the team performing the audits and reviews; did not properly prepare and maintain audit documentation, known as “workpapers;” and failed to obtain engagement quality reviews, without which an audit firm may not issue an audit report. According to the SEC’s order, of 369 BF Borgers clients whose public filings from January 2021 through June 2023 incorporated BF Borgers’s audits and reviews, at least 75 percent of the filings incorporated BF Borgers’s audits and reviews that did not comply with PCAOB standards.

The SEC’s order further finds that, at Benjamin Borgers’s direction, BF Borgers staff copied workpapers from previous engagements for their clients, changing only the relevant dates, and then passed them off as workpapers for the current audit period. As a result, the order finds, BF Borgers’s workpapers falsely documented work that had not been performed. Among other things, the workpapers regularly documented purported planning meetings – required to discuss a client’s business and consider any potential risk areas – that never occurred and falsely represented that both Benjamin Borgers, as the partner in charge of the engagement, and an engagement quality reviewer had reviewed and approved the work.

The SEC’s order in this case reads like a litany of every SEC rule & statutory provision that an auditor could conceivably violate (or cause its client to violate) in connection with an audit or review engagement. The case was settled on a neither admit nor deny basis, but not surprisingly, the SEC absolutely clobbered both respondents in terms of the sanctions it imposed. In addition to hefty monetary penalties, the SEC essentially put an end to both respondents’ public company practice by issuing an order under Rule 102(e) denying them the privilege of appearing or practicing before the SEC as an accountant.

BF Borgers may not have been well known to many of our readers before last Friday, but the firm has been a fairly significant player, particularly among small cap issuers. The firm ranked 8th in overall market share for public company audits last year & ranked 6th in market share for non-SPAC initial public offerings. It also was the auditor for a particularly high-profile public company, Trump Media, and . . . umm. . . [This marks the point where I stopped writing and bit my tongue so hard I had to go to the ER for stitches.]

John Jenkins