SEC Settles Administrative Proceedings Against Audit Firm and Two Partners
March 31, 2022
File No. 3-94570
March 31, 2022 - The Securities and Exchange Commission today announced settled charges against Stockman, Kast, Ryan, & Co. LLP. (SKR), an audit firm based in Colorado Springs, Colorado, and two audit partners, Ellen Fisher, CPA, and David Kast, CPA, for their improper professional conduct in connection with audits of private funds advised by an SEC-registered investment adviser.
According to the SEC's order, Fisher, the audit engagement partner, and SKR failed to obtain sufficient appropriate audit evidence regarding the valuation and existence of certain hard to value assets held by the private funds. The order finds that Fisher and SKR failed to meet applicable auditing standards related to audit planning, evaluating audit results, audit documentation, and supervision and review, and that Kast, as the engagement quality review partner, reviewed and approved work papers that failed to obtain sufficient appropriate audit evidence regarding the valuation and existence of assets. The order also finds that SKR was not independent because an SKR partner served as trustee or general partner for trusts that invested in private funds audited by SKR, and because SKR provided bookkeeping services to one of the private funds it audited.
The SEC's order finds that SKR, Fisher, and Kast engaged in improper professional conduct within the meaning of Section 4C(a)(2) of the Securities Exchange Act of 1934 and Rule 102(e)(1)(ii) of the Commission's Rules of Practice, and caused the investment adviser to violate Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-2. Without admitting or denying the findings, SKR, Fisher, and Kast agreed to cease and desist from future violations and to pay civil money penalties of $96,384, $25,000, and $10,000, respectively. SKR consented to a censure; and Fisher and Kast are suspended from appearing or practicing before the SEC as accountants, with permission to apply for reinstatement after two years and one year, respectively.
The litigation was led by Terry R. Miller and Zachary T. Carlyle and supervised by Gregory Kasper. The SEC's investigation was conducted by Michael D'Angelo and Jacqueline Moessner, with assistance from Willa Fuller, of the Denver Regional Office; and was supervised by Mary Brady.