Ernst & Young Settles PCAOB Disciplinary Order for Audit Failures

The Public Company Accounting Oversight Board announced a settled disciplinary order censuring Ernst & Young LLP, imposing a $2 million civil money penalty against the firm, and sanctioning four of its current and former partners for violating PCAOB rules and standards.  The $2 million civil money penalty is the Board's largest civil money penalty to date. The respondents agreed to settle without admitting or denying the Board's findings.

The order related to three E&Y audits of Medicis Pharmaceutical Corporation, and a consultation stemming from an internal E&Y audit quality review of one of the audits.  James R. Doty, PCAOB Chairman, summarized E&Y's failings:

These audit partners and Ernst & Young — the company's outside auditor for more than 20 years — failed to fulfill their bedrock responsibility. The auditor's job is to exercise professional skepticism in evaluating a public company's accounting and in conducting its audit to ensure that investors receive reliable information, which did not happen in this case.