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Report: SEC Increased Accounting and Auditing Enforcement in FY 2023 but Recovered Less Money

S.J. Steinhardt
Published Date:
Feb 29, 2024

The Securities and Exchange Commission (SEC) increased its accounting and auditing enforcement activity in fiscal year 2023, but the total amount of the monetary settlements declined, according to a new report, Accounting Today reported.

The report, by Cornerstone Research, found that the number of accounting and auditing enforcement actions  brought by the SEC increased by 22 percent in fiscal year 2023. The 83 publicly disclosed accounting and auditing enforcement actions represented the highest number of actions initiated since fiscal year 2019. More than half of these actions were brought by the SEC in the fourth quarter of that fiscal year, ending on Sept. 30—with 28 percent initiated in September, the last month of the fiscal year.

There were a total of 111 total respondents in accounting and auditing enforcement actions initiated in fiscal year 2023, an increase from the 103 respondents in the previous fiscal year.

Of the 83 accounting and auditing enforcement actions, 35 referred to announced restatements of financial statements, and 32 involved announcements of material weaknesses in internal control. Actions referring to announced restatements and/or material weaknesses in internal control remained at 41, the highest number since fiscal year 2021. Of the 83 actions initiated in fiscal year 2023, 71 were administrative proceedings while 12 were civil actions.

Although the SEC obtained its second-highest total of monetary settlements during fiscal year 2023, $4.9 billion, monetary settlements for accounting and auditing enforcement actions added up to $583 million, down by 7 percent from fiscal year 2022, and down by 47 percent from the average of total monetary settlements in the prior five fiscal years, according to the report. 

"The decline in monetary settlements during fiscal year 2023 may be due, in part, to a continued increase in the SEC's consideration given to cooperation and remedial efforts when imposing monetary settlements," said Simona Mola, a report coauthor and principal at Cornerstone Research, in a statement reported by Accounting Today. "Such consideration may translate in lower monetary settlements but not necessarily in no penalties at all. In fact, the proportion of respondents who received no monetary settlement decreased from last fiscal year."

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