Ernst & Young agrees to settle Weatherford case for $11.8 million

Ernst & Young agreed to pay $11.8 million to settle charges related to audits of Weatherford International, an oil services company that inflated earnings through deceptive income tax accounting, the Securities and Exchange Commission said.

The money from Ernst & Young will be combined with $140 million that Weatherford and two former employees agreed to pay last month and returned to investors, according to the agency.

Ernst & Young spokesman John La Place said in a statement that the firm has taken steps to improve the firm’s audit process.

“Our commitment to audit quality is ongoing, and we are continually reviewing and enhancing our audit procedures, policies and training of our people,” he said. “We are pleased to put this matter behind us.”

Weatherford did not immediately respond to a request for comment. 2 partners sanctioned

The SEC also sanctioned two Ernst & Young partners for the way they “disregarded significant red flags” during their audit work.

Craig Fronckiewicz, the Ernst & Young partner who coordinated the audits, and Sarah Adams, the former tax partner who was part of the audit team, agreed to a suspension from practicing before the agency as accountants, which includes not participating in financial reporting or audits of public companies.

In two years, Fronckiewicz can apply for reinstatement and Adams can apply in one year, according to the agency.

Fronckiewicz works in Ernst & Young’s office in Houston, but could not be immediately reached for comment. Young, who is now the vice president of tax at Service Corporation International, declined to comment. SEC’s order

Ernst & Young, Fronckiewicz, and Adams consented to the SEC’s order without admitting or denying they caused Weatherford’s reporting violations or engaged in improper professional conduct, according to the agency.

The agency criticized Ernst & Young for “repeatedly” failing to detect alleged fraud at Weatherford for four years.

The firm’s audit team relied on Weatherford’s “unsubstantiated explanations” of adjustments the company was making to lower its income taxes rather than “performing the required audit procedures to scrutinize the company’s accounting,” according to the agency.