EY to Pay $4 Million to Settle SEC Allegations

http://online.wsj.com/articles/ernst-young-to-pay-4-million-to-settle-sec-allegations-1405365560

Ernst & Young LLP agreed to pay $4 million to the SEC for violations of auditor-independence rules that were committed by E & Y’s Washington Council. The Washington Council had some meetings with congressional staff, asked to have some specific language inserted into bills, and also asked third parties to go approach a U.S. Senator (whatever that means), all on behalf of some of their audit clients. Unfortunately, the names of the clients were not revealed.

It seems as though E & Y tried to reach a little too far in their attempt to influence Washington and their decision making process. The fact remains that the Big 4 have been doing this for years. In 2012, Reuters reported that the Big 4 spent a combined $9.4 million in 2011 on in-house and outside lobbyists, which is more than any year since 2002. 2002 is a red letter year, as most of you probably know, because of the Enron and Arthur Andersen debacle, which brought the Big 5 down to the Big 4. A large, significant portion of the money contributed by the Big 4 goes towards influencing the PCAOB. Being a former employee of one of the Big 4 firms, I would think that the lobbying money would be to lessen regulation over the auditing standards. The Big 4 want to maintain their position as the go-to auditors for as long as they possibly can. Senators in Washington probably have a greater tendency, if at all, to try and level the playing field as best they can between the Big 4 and every other accounting firm in the world.

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