Ernst & Young Affiliate Fined in Audit-Independence Case

The Securities and Exchange Commission is investigating a number of possible audit-independence abuses by U.S. accounting firms, an SEC official said Thursday as the agency announced a $400,000 fine of Ernst & Young’s Dutch affiliate.

“There may well be audit-independence cases coming down soon, including some involving the Big Four accounting firms,” Paul R. Berger, the SEC’s associate enforcement director, said in an interview.

SEC rules forbid auditors from doing other business with clients because it may lead auditors to go easy on checking the books.

Ernst & Young’s Dutch affiliate was censured for “improper professional conduct” in connection with its audits of Baan from 1995 to 1997, while the firm was helping Baan sell its software, the SEC said.

The Ernst & Young affiliate agreed to pay a $400,000 penalty, the first fine against an accounting firm for audit-independence violations, the SEC said.

A lawyer for Ernst & Young Netherlands declined to comment. The firm neither admitted nor denied wrongdoing as part of its settlement, the SEC said.