A Colorado-based audit firm and one of its engagement partners were spared financial penalties in settling with the Securities and Exchange Commission (SEC) over allegations of improper professional conduct during the audits of two private funds.

Spicer Jeffries agreed to be censured and retain an independent consultant to review certain of its policies and procedures as part of its settlement with the SEC announced Wednesday. Engagement partner Sean Tafaro received a one-year suspension from appearing and practicing before the agency as an accountant.

The details: In 2019, Spicer Jeffries and Tafaro allegedly failed to do the following in their work at the two private funds:

  • Adequately respond to significant risks identified during the planning stage of the audits;
  • Obtain sufficient appropriate audit evidence to support audit opinions;
  • Prepare sufficient audit documentation; or
  • Exercise due care and professional skepticism.

As a result, the firm ran afoul of generally accepted auditing standards and American Institute of Certified Public Accountants (AICPA) quality control standards, according to the SEC. Tafaro was cited for not adequately supervising the audit engagement.

Compliance ramifications: The independent consultant Spicer Jeffries must retain within 60 days will be charges with reviewing and evaluating the firm’s audit, review, and quality control policies and procedures regarding the following, according to the SEC’s order:

  • Exercising due care and professional skepticism in the performance of an audit;
  • Performing audit procedures on accounting estimates, including fair value accounting estimates;
  • Obtaining sufficient appropriate audit evidence;
  • Preparing sufficient audit documentation;
  • Supervising engagement personnel; and
  • Reviewing audit documentation.

The consultant must be allowed “full access” to the firm’s files, records, and personnel and will issue a report summarizing changes recommended to Spicer Jeffries’ policies. The firm must adopt those recommendations unless it can prove them to be impractical.

Within two years, Spicer Jeffries must also require its audit professionals employed for at least one year complete a minimum of 24 hours of audit-related training.

The firm’s managing partner must certify to the SEC compliance with these undertakings.

Spicer Jeffries did not respond to a request for comment. The company neither admitted nor denied the SEC’s findings in reaching settlement.

Kyle Brasseur is Editor in Chief of Compliance Week. His background includes expertise in user personalization with ESPN.com.

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