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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

Securities Act of 1933
Rel. No. 8413 / April 26, 2004

Securities Exchange Act of 1934
Release No. 49615 / April 26, 2004

Accounting And Auditing Enforcement
Release No. 1991 / April 26, 2004

Admin. Proc. File No. 3-10933


In the Matter of

ERNST & YOUNG LLP,

Respondent.



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ORDER GRANTING MOTION FOR EXPEDITED ENTRY OF FINAL ORDER AND NOTICE THAT INITIAL DECISION HAS BECOME FINAL

This matter comes before the Commission on joint motion of Respondent and the Division of Enforcement and the Office of the Chief Accountant for expedited entry of an order making final the initial decision of the administrative law judge* that was issued on April 16, 2004. In their joint motion, the parties have stated that no petition for review will be filed; and the Commission has not chosen to review the initial decision on its own initiative. Accordingly, the motion is granted.

I.

Notice is hereby given, pursuant to Rule 360(d) of the Commission's Rules of Practice, that the initial decision of the administrative law judge* issued on April 16, 2004 has become the final decision of the Commission with respect to Respondent Ernst & Young LLP, and the Order contained therein is declared effective. Accordingly, the Commission hereby orders that:

Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934:

A. Ernst & Young LLP shall cease and desist from committing any violations and any future violations of Rule 2-02 of Regulation S-X, and from causing any violations and any future violations of Sections 7(a) and 10(a) of the Securities Act of 1933, and Sections 13(a) and 14(a) of the Securities Exchange Act of 1934, and Rules 13a-1 and 14a-3 thereunder.

B. Ernst & Young LLP shall disgorge the sum of $1,686,500, plus $478,050 in prejudgment interest thereon. Ernst & Young LLP shall pay this disgorgement and prejudgment interest, which total $2,164,550, on April 27, 2004 by United States postal money order, wire transfer, certified check, bank cashier's check, or bank money order payable to the U.S. Securities and Exchange Commission. Payment shall be accompanied by a cover letter identifying Ernst & Young LLP as the Respondent and Administrative Proceeding No. 3-10933 as the number of this case, and should be delivered by hand or courier to the Office of Financial Management, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, Virginia 22312. A copy of the payment and the cover letter should be sent to the Commission's Division of Enforcement, c/o J. Lee Buck, II, 450 Fifth Street, N.W., Washington, DC, 20549-0806.

C. Ernst & Young LLP shall retain an independent consultant acceptable to the Commission, to work with Ernst & Young LLP to assure the Commission that Ernst & Young LLP's leadership is committed to, and has implemented policies and procedures that reasonably can be expected to remedy the violations found and result in compliance with the Commission's rules on auditor independence related to business relationships with clients and with GAAS. Ernst & Young LLP shall cooperate with the independent consultant in all respects, including staff support, and shall compensate the independent consultant, and staff, if one is necessary, at reasonable and customary rates. Once retained, Ernst & Young LLP shall not terminate the relationship with the independent consultant without Commission approval. The independent consultant shall report to the Commission in writing six months from the date work has begun as to the findings of its review and Ernst & Young LLP's efforts at correcting the violations.

Pursuant to Section 4C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission's Rules of Practice:

Ernst & Young LLP is suspended from accepting audit engagements for new Commission registrant audit clients for a period of six months, commencing today.

II.

Further, pursuant to a voluntary undertaking of Ernst & Young LLP, to the extent that Ernst & Young LLP is permitted to audit any new registrant during the six-month suspension period (e.g., a pre-existing private Ernst & Young LLP audit client making an initial public offering), Ernst & Young LLP shall provide, prior to the effective date (unless it obtains an exception from the Office of the Chief Accountant), sworn declarations by both its Chief Executive Officer and its Vice Chair for Quality and Risk Management certifying that Ernst & Young LLP is independent, under SEC rules, PCAOB standards, GAAS and all other applicable standards, with respect to each such new registrant.

By the Commission.

Jonathan G. Katz
Secretary


Endnotes


http://www.sec.gov/litigation/admin/33-8413.htm


Modified: 10/29/2004