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SEC Charges Three Ernst & Young Professionals with Violating Auditor Independence Rules

Dec. 10, 2021

File Nos. 3-20671, 3-20672, 3-20673, and 3-20674

December 10, 2021 - The Securities and Exchange Commission today charged three professionals from public accounting firm Ernst & Young LLP (EY) with violations of the rules that ensure firms maintain their independence during audits. The SEC also charged an accountant at EY's audit client with violations of the reporting provisions of the federal securities laws requiring public companies to be audited by an independent public accountant.

As stated in the SEC's orders, the SEC auditor independence rules require accounting firms to be independent of public companies that hire them to perform audits. The SEC's orders find that tax professionals at EY billed public company Cintas Corporation for contingent fees for non-audit tax services for approximately nine years, despite EY also being hired to audit Cintas. As a result, the SEC's orders find that EY was not independent of Cintas during that time period, and, therefore, Cintas filed annual and quarterly reports with the Commission that were not audited or reviewed by an independent public accountant.

The SEC's order against Philip S. Hurak, an attorney and former EY engagement manager, finds that he approved EY's invoices sent to Cintas containing contingent fees for non-audit services for several years. The SEC's order against Adam D. Bering, an attorney and the EY engagement partner for the non-audit services, finds that he failed to perform a reasonable inquiry in response to information that staff under his supervision were billing Cintas for non-audit services on a contingent fee basis and did not stop the practice. The SEC order against Alan C. Greenwell, a licensed certified public accountant and former EY partner, finds that he engaged in improper professional conduct within the SEC's Rules of Practice by failing to investigate red flags regarding the contingent fee arrangement. Finally, the SEC order against Scott D. Clark, an accountant and former vice president of corporate taxation for Cintas, finds that he negotiated and approved payment of EY's contingent fee invoices on Cintas's behalf.

The SEC orders against the respondents find that they aided and abetted and/or caused violations of Rule 2-02(b)(1) of Regulation S-X and Exchange Act Section 13(a) and Rules 13a-1 and 13a-13. Respondents consented to the SEC orders without admitting or denying the findings and agreed to cease and desist from future violations and pay civil money penalties. Hurak and Bering are suspended from appearing and practicing before the SEC as attorneys, with permission to apply for reinstatement after two years and one year, respectively. Greenwell and Clark are suspended from appearing and practicing before the SEC as accountants, with permission to apply for reinstatement after two years and one year, respectively.

The SEC's investigation was conducted by Margaret Vizzi and Antony Richard Petrilla. The case was supervised by Carolyn Welshhans, Brian O. Quinn, and Dwayne Brown.

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