Two former auditors with Big Four firm KPMG were suspended by the Securities and Exchange Commission (SEC) for improper professional conduct during an audit of the now-defunct College of New Rochelle.

Christopher Stanley, a former KPMG partner, and Jennifer Stewart, a former senior manager, agreed to suspensions of three years and one year, respectively, in settlements announced Tuesday. The two will each be able to apply for reinstatement following the end of their suspension terms. Neither admitted nor denied the SEC’s findings, and no fines were issued.

The alleged misconduct by Stanley and Stewart occurred during an audit at the college for fiscal year 2015. Stanley was the audit partner in charge of supervising the audit team and approving the audit report, and Stewart was the engagement manager responsible for day-to-day supervision. The team met challenges during the audit due to then-unknown fraud being carried out by the college’s former controller, Keith Borge, at the time.

Borge was failing to provide the team with timely responses and accurate information and took time off during critical periods of the audit, according to the SEC. Things came to a head on Nov. 30, 2015, when Borge emailed Stewart notifying her KPMG needed to issue its audit report that day in order to meet a deadline imposed by the college’s bank. Stanley received a similar request from the president of the college.

Despite lacking information needed from Borge and red flags raised by members of the team, “Stanley and [Stewart] reviewed the outstanding open items and unanswered questions and unreasonably concluded that none of the outstanding items or questions should prevent KPMG from issuing its audit report” that day, the SEC said.

“Although KPMG issued its audit report on November 30, 2015, the audit evidence at that time was not sufficient to support the audit opinion,” the agency continued. The audit team, under Stanley and Stewart’s supervision, “failed to verify the existence of assets or the completeness of liabilities.” Work on the audit continued into 2016, and the opinion was ultimately withdrawn in November 2016 after Borge’s fraud was discovered.

“Auditors of municipal issuers are key gatekeepers in upholding the reliability and integrity of financial information provided to investors in municipal bonds,” said Matthew S. Jacques, chief accountant of the SEC’s Enforcement Division, in a press release. “It is critical that they exercise professional care and skepticism.”

The SEC’s orders find Stanley and Stewart violated GAAP by “failing to obtain sufficient appropriate audit evidence, properly prepare audit documentation, properly examine journal entries, adequately assess audit risk, and exercise due professional care and professional skepticism.” As a result of Borge’s fraud, the college’s fiscal year 2015 net assets were overstated by $33.8 million impacting virtually every amount reported on its balance sheet, the agency said.

Borge pleaded guilty to securities fraud in 2019 and was sentenced to three years in federal prison. The College of New Rochelle, located in New York, filed for bankruptcy in September 2019 as a result of its financial challenges and closed after 115 years.

Stanley resigned from KPMG in March 2020, and Stewart’s employment with the firm also ended that month.

“We are committed to executing quality audits, while continuing to foster a culture of integrity,” a KPMG spokesperson said in an emailed statement. “The actions as described in the SEC orders do not live up to KPMG standards.”