Ernst & Young To Pay $11.8 Million To Settle Audit Charges

WASHINGTON (Reuters) – Ernst & Young will pay $11.8 million to settle charges over “failed audits” of oil services company Weatherford International Plc , the U.S. Securities and Exchange Commission said on Tuesday.

An Ernst & Young partner who coordinated the audits and a former tax partner who was part of the audit team were also charged in the SEC’s order, the agency said in a statement. Under the settlement, both men agreed to “suspensions to settle charges that they disregarded significant red flags during the audits and reviews,” the SEC said.

The charges follows $140 million penalty imposed on Weatherford’s announced last month to settle charges of inflating its earnings.

An spokeswoman for Ernst & Young, which neither admitted nor denied the SEC’s findings, could not be reached for comment.

The SEC found that Ernst & Young classified Weatherford audits as high-risk but repeatedly failed to detect the company’s fraud until it had continued for more than four years.

The Ernst & Young audit team knew of accounting adjustments that Weatherford was making to significantly lower the amount it set aside at the end of each year for income taxes, the SEC said.

But the auditors relied on Weatherford’s “unsubstantiated explanations” instead of performing required audit procedures to scrutinize Weatherford’s accounting, the SEC said.

(Reporting by Susan Heavey; Editing by Mohammad Zargham and Steve Orlofsky)

Photo: The Ernst & Young building rises above Times Square in New York June 18, 2014. REUTERS/Lucas Jackson