U.S. regulatory authorities have sanctioned a number of audit firms for violating independence rules in their work as both auditors and preparing financial statements for brokerage firms.

The U.S. Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) both sanctioned firms for violating auditor independence rules in connection with their work for brokerage firms. The SEC sanctioned eight firms for violations when they prepared the financial statements of brokerage firms that were also their audit clients. And, the PCAOB sanctioned seven firms.

The SEC said that its investigations found that the audit firms took data from financial documents provided by clients during audits and used it to prepare their financial statements. “Under auditor independence rules, firms cannot jeopardize their objectivity and impartiality in the auditing process by providing such non-audit services to audit clients,” it says. “By preparing the financial statements, these particular firms essentially put themselves in the position of auditing their own work, and they inappropriately aligned themselves more closely with the interests of clients’ management teams in helping prepare the books rather than strictly auditing them.”

The SEC’s orders censure each firm, require them to cease and desist from committing further violations, to collectively pay US$140,000 in penalties, and to comply with a series of undertakings designed to prevent future violations of the independence requirements. The firms consented to the orders without admitting or denying the SEC’s findings.

In today’s settlements with the PCAOB, the firms agreed to censure, to each pay US$2,500 in penalties, and to undertake significant remedial measures to prevent further violations. The firms also settled the PCAOB’s findings without admitting or denying its findings.

“The bedrock of audit quality is independence. When an auditor’s independence is impaired, the auditor’s responsibility to exercise professional skepticism, and to serve the public trust, is also put at risk,” said James Doty, chairman of the PCAOB. “Adhering to independence requirements is critically important.”