SEC Charges BF Borgers CPA Firm with 'Massive Fraud' in Audits

The SEC charged auditing firm BF Borgers CPA PC and its owner with "massive fraud" for certifying companies as compliant with American standards despite deliberate failures. The firm agreed to pay a $12 million penalty and its owner $2 million, with both facing permanent suspensions.

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SEC Charges BF Borgers CPA Firm with 'Massive Fraud' in Audits

SEC Charges BF Borgers CPA Firm with 'Massive Fraud' in Audits

The US Securities and Exchange Commission (SEC) has charged auditing firm BF Borgers CPA PC and its owner, Benjamin F. Borgers, with "massive fraud" for their role in certifying companies as compliant with American standards. The SEC alleges that the firm engaged in "deliberate and systemic failures" to comply with Public Company Accounting Oversight Board (PCAOB) standards in its audits and reviews incorporated in over 1,500 SEC filings from January 2021 through June 2023.

Why this matters: This case highlights the critical importance of trustworthy auditing firms in maintaining the integrity of financial markets, and the severe consequences of fraudulent practices that can erode investor confidence. The SEC's enforcement action serves as a warning to other auditing firms to uphold their professional standards and comply with regulations, lest they face similar penalties and reputational damage.

According to the SEC, BF Borgers' misconduct affected at least 75% of the filings, putting investors and markets at risk. Gurbir S. Grewal, Director of the SEC's Division of Enforcement, stated, "Ben Borgers and his audit firm, BF Borgers, were responsible for one of the largest wholesale failures by gatekeepers in our financial markets." He emphasized the critical role that accountants and accounting firms play in the financial markets, as investors rely on audited financial statements when making investment decisions.

The SEC charged BF Borgers and Benjamin Borgers with falsely representing to their clients that the firm's work would comply with PCAOB standards, fabricating audit documentation to make it appear compliant, and falsely stating in audit reports that the audits adhered to PCAOB standards. The firm's staff allegedly copied workpapers from previous engagements, changing only the relevant dates, and passed them off as current audit period workpapers. These workpapers falsely documented work that had not been performed, including purported planning meetings that never occurred.

As part of a settlement with the SEC, BF Borgers agreed to pay a $12 million civil penalty, while Benjamin Borgers will pay a $2 million penalty. Both the firm and its owner consented to permanent suspensions from appearing and practicing before the Commission as accountants, effective immediately. The accuracy of financial information in thousands of reports issued by companies audited by BF Borgers is now in question.

One notable client affected by the SEC action is Trump Media & Technology Group, the parent company of Truth Social, which has been working with BF Borgers since 2022. In response to the SEC order, Trump Media stated, "We look forward to working with new auditing partners in accordance with today's S.E.C. order." Following the announcement, Trump Media's share price fell 9% shortly after trading began on Friday.

The SEC's investigation into BF Borgers was conducted by Taryn Lewis, Jake Schmidt, and Ann Tushaus of the Chicago Regional Office, under the supervision of Brian Fagel. This enforcement action serves as a vivid illustration of the critical role auditing firms play in ensuring the accuracy and integrity of financial statements that investors rely upon. It also highlights the SEC's commitment to holding gatekeepers accountable and protecting the trust and confidence in the markets.

Key Takeaways

  • SEC charges BF Borgers CPA PC and owner Benjamin Borgers with "massive fraud" for audit failures.
  • Firm's misconduct affected 75% of 1,500 SEC filings, putting investors and markets at risk.
  • BF Borgers agreed to pay $12 million penalty, Benjamin Borgers $2 million, and both face permanent suspension.
  • Trump Media & Technology Group, a notable client, saw its share price fall 9% after the SEC order.
  • SEC's enforcement action highlights the critical role of trustworthy auditing firms in maintaining market integrity.