Monday, March 26, 2007
The SEC issued an Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions against Ernst & Young, LLP. In the Order, the Commission sanctioned E&Y for conduct arising out of the firm's violations of auditor independence standards. Without admitting or denying the Commission's findings, E&Y consented to the issuance of the Order. In its Order, the Commission found that, throughout 2001, E&Y, through National Office partner Michael S. Joseph, helped develop and market
an accounting product for one client, American International Group, Inc., and advised an audit client, The PNC Financial Services Group, Inc., on the accounting treatment for a version of that product that PNC purchased. The Commission found that as a result of Joseph's actions, E&Y compromised its auditor independence. Because E&Y was not independent, the firm did not conduct independent reviews of PNC's financial statements for the second and third quarters of 2001 and, therefore, was a cause of PNC's violations of reporting provisions of the federal securities laws that require quarterly reviews of financial statements to be conducted by an independent accountant.