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SEC Action Against Small Company Focuses Solely on Internal Controls

Tammy Whitehouse | August 8, 2014

A recent enforcement action on internal controls is noteworthy not because of the allegations it contains, but for what it does not allege, according to a securities and litigation law firm that called it out.

The Securities and Exchange Commission is pursuing charges against the CEO and former CFO of smaller reporting company QSGI, a tech services company in Florida, over internal control violations. The SEC says CEO Marc Sherman and former CFO Edward Cummings misled auditors in connection with 2008 financial statements regarding the state of internal controls, which sent auditors on a faulty audit trail because they were missing important information to plan their audit appropriately. The company subsequently filed for bankruptcy in 2009, the SEC says.

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