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Recent SEC Complaint Highlights Potential Management Risks When Communicating with Auditors During a Financial Crisis by David B. Hardison
Fried, Frank, Harris, Shriver & Jacobson LLP - Washington Office
David Whipple
Fried, Frank, Harris, Shriver & Jacobson LLP - Washington Office
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May 16, 2012
Previously published on May 15, 2012
SEC enforcement actions often include allegations that corporate officers affirmatively misled a company's outside auditors as part of a scheme to commit and perpetuate an accounting fraud. Such misleading actions might include, for example, signing false management representation letters or providing the auditors with fictitious documentation to support material misstatements in a company's financial statements. The SEC often includes such allegations as evidence that a company's officers acted recklessly or with intent to defraud, and thereby violated Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder. In an increasing number of recent cases, however, the SEC has also alleged that corporate officers violated Exchange Act Rule 13b2-2, which expressly prohibits officers and directors from misleading or improperly influencing a company's auditors and does not require a showing that an officer or director acted with fraudulent intent.
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