The Securities and Exchange Commission has suspended an accountant for conducting a faulty audit of ContinuityX Solutions , an IT service provider whose executives were ultimately charged with financial fraud.
The auditor, EFP Rotenberg LLP of New York, has agreed to pay a $100,000 penalty to settle the SEC's charges and is prohibited from accepting new public clients for one year, the SEC said.
The accountant involved in the case, Nicholas Bottini, agreed to pay a $25,000 penalty. He is permanently suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies, the SEC added.
ContinuityX's executives have been charged by the SEC for allegedly engineering a scheme to grossly overstate the company’s revenue through fraudulent sales, the SEC said.
During the audits of ContinuityX, EFP Rotenberg and Bottini failed to perform sufficient procedures to detect the fraudulent sales in the company’s financial statements, the SEC said.
The SEC said EFP Rotenberg and Bottini also failed to:
- Obtain sufficient audit evidence over revenue recognition and accounts receivable;
- identify related party transactions;
- investigate management representations that contradicted other audit evidence;
- perform procedures to resolve and properly document inconsistencies, and
- exercise due professional care.
The SEC's Financial Reporting and Audit Group works closely with whistle blowers, gatekeepers and academic professionals to spot and eliminate financial fraud.