SEC Suspends Former BDO Accountants for Improperly “Predating” Audit Work Papers
The SEC suspended three BDO USA LLP accountants—Lev Nagdimov, Richard J. Bertuglia, and John W. Green—for predating and falsifying audit documentation during AmTrust Financial Services’ 2013 audit, resulting in suspensions of 5, 3, and 1 year respectively, after they concealed incomplete audit work and issued unqualified opinions on flawed financial statements.
The SEC found that Lev Nagdimov, senior manager on the 2013 audit of AmTrust Financial Services Inc., instructed his team to sign blank or incomplete audit work papers to falsely create the appearance of completed procedures before the SEC filing deadline, later overwriting them with actual work after the report was issued. Engagement partner Richard J. Bertuglia and quality review partner John W. Green failed to exercise due professional care, allowing the audit to issue unqualified opinions on AmTrust’s financial statements and internal controls despite known deficiencies. Without admitting or denying the findings, Nagdimov, Bertuglia, and Green each agreed to suspensions from practicing before the SEC—five, three, and one year respectively—for violating PCAOB standards and Section 4C(a)(2) of the Exchange Act and Rule 102(e)(1)(ii).
The SEC suspended three former BDO USA LLP accountants—Lev Nagdimov, Richard J. Bertuglia, and John W. Green—for their roles in a fraudulent audit manipulation during the 2013 integrated audit of AmTrust Financial Services Inc. Nagdimov, the senior manager, directed the audit team to sign blank or placeholder work papers before completing required procedures, creating a false appearance of audit completion ahead of the SEC filing deadline, and later overwrote those documents with actual work after the report was issued. The SEC determined that Bertuglia, as engagement partner, and Green, as quality review partner, failed to exercise due professional care and should have detected the manipulated documentation before issuing unqualified opinions on AmTrust’s financial statements and internal controls. The SEC uncovered the fraud by comparing BDO’s final archived work papers with an earlier snapshot requested during its investigation, revealing the predating and falsification. Without admitting or denying the findings, all three agreed to suspensions from appearing or practicing before the SEC: Nagdimov for five years, Bertuglia for three, and Green for one. The SEC emphasized that such conduct constitutes a serious breach of professional obligations under PCAOB standards and Section 4C(a)(2) of the Exchange Act and Rule 102(e)(1)(ii), and reaffirmed its commitment to protecting investors from audit fraud. The investigation was led by the Fort Worth Regional Office, with oversight from Eric R. Werner and Jim Etri.
Exhibits & Attached Documents (1)
Extracted insights
- person audit team
- agency from appearing and practicing before the sec as accountants
- person lev nagdimov
- agency Securities and Exchange Commission
- Securities And Exchange Commission Suspended Three Former Bdo Usa Llp Accountants
- Securities And Exchange Commission Announced Improper Professional Conduct During Audit Of An Exchange-Listed Insurance Company
- Securities And Exchange Commission Found Bdo Fell Behind Schedule While Conducting Its 2013 Integrated Audit Of Amtrust Financial Services Inc.
- Lev Nagdimov Instructed Bdo’S Audit Team To Sign Off On All Work Papers And Audit Programs Regardless Of Whether Its Work Was Finished
- Lev Nagdimov Instructed Bdo’S Audit Team To Load And Sign Blank Or Placeholder Work Papers In Bdo’S Electronic Files
- Audit Team Improperly Predated Audit Documentation By Signing Blank Or Incomplete Work Papers And Audit Programs
- Audit Team Finished Its Necessary Audit Procedures And Preserved The Predated Sign-Offs In Bdo’S Electronic Files By Overwriting Existing Documentation In The Placeholder Work Papers
- Securities And Exchange Commission Required Bdo To Produce An Earlier Snapshot Of Its Work Papers From The Period When The Predated Documents Were In Place
- Securities And Exchange Commission Identified The Audit Deficiencies And Predated Work Papers By Comparing Bdo’S Final, Archived Work Papers To The Snapshot Of The Work Papers As They Existed At The Time That Bdo Released Its Audit Report
- Securities And Exchange Commission Found Richard J. Bertuglia And John W. Green Had Properly Exercised Due Professional Care
- Securities And Exchange Commission Found Nagdimov, Bertuglia, And Green Violated Auditing Standards Established By The Public Company Accounting Oversight Board
- Nagdimov, Bertuglia, And Green Agreed To Be Suspended From Appearing And Practicing Before The Sec As Accountants
- Securities And Exchange Commission Permits Nagdimov To Apply For Reinstatement After Five Years
- Securities And Exchange Commission Permits Bertuglia To Apply For Reinstatement After Three Years
- Securities And Exchange Commission Permits Green To Apply For Reinstatement After One Year
- Securities And Exchange Commission Conducted Investigation By Christopher W. Ahart, Michelle Lama, Keith J. Hunter, And David R. King
- Securities And Exchange Commission Supervised Investigation By Eric R. Werner And Jim Etri Of The Fort Worth Regional Office
The Securities and Exchange Commission today suspended three former BDO USA LLP accountants for their improper professional conduct during an audit of an exchange-listed insurance company. According to the SEC’s order, BDO fell behind schedule while conducting its 2013 integrated audit of AmTrust Financial Services Inc. and ultimately failed to complete necessary audit procedures before AmTrust’s deadline to file its annual report with the SEC. To create the appearance that BDO’s audit was in fact complete, the senior manager on the audit engagement, Lev Nagdimov, instructed BDO’s audit team to sign off on all work papers and audit programs regardless of whether its work was finished. Nagdimov further instructed BDO’s audit team to load and sign blank or placeholder work papers in BDO’s electronic files. Consistent with Nagdimov’s instructions, the audit team improperly “predated” audit documentation by signing blank or incomplete work papers and audit programs. After AmTrust filed its 2013 annual report, the audit team finished its necessary audit procedures and preserved the predated sign-offs in BDO’s electronic files by overwriting existing documentation in the placeholder work papers. BDO was required to produce an earlier snapshot of its work papers from the period when the “predated” documents were in place, pursuant to an SEC request. The SEC identified the audit deficiencies and predated work papers by comparing BDO’s final, archived work papers to the snapshot of the work papers as they existed at the time that BDO released its audit report. The SEC’s order also found that if BDO’s engagement partner Richard J. Bertuglia and engagement quality review partner John W. Green had properly exercised due professional care, they would have identified these audit deficiencies before they released BDO’s audit report, which provided unqualified opinions on AmTrust’s 2013 financial statements and internal control over financial reporting. “Auditors are entrusted with significant responsibility when auditing public companies,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office. “Public accountants who manipulate their files to conceal audit deficiencies represent a serious breach of those professional obligations, and the Commission will impose suspensions to protect investors.” The SEC’s order finds that Nagdimov, Bertuglia, and Green violated auditing standards established by the Public Company Accounting Oversight Board, and engaged in improper professional conduct within the meaning of Section 4C(a)(2) of the Exchange Act and Rule 102(e)(1)(ii) of the SEC’s Rules of Practice. Without admitting or denying the findings in the SEC’s order, Nagdimov, Bertuglia, and Green each agreed to be suspended from appearing and practicing before the SEC as accountants, which includes not participating in the financial reporting or audits of public companies. The SEC’s order permits Nagdimov to apply for reinstatement after five years, Bertuglia to apply for reinstatement after three years, and Green to apply for reinstatement after one year. The SEC’s investigation was conducted by Christopher W. Ahart, Michelle Lama, Keith J. Hunter, and David R. King and supervised by Eric R. Werner and Jim Etri of the Fort Worth Regional Office.
The Securities and Exchange Commission today suspended three former BDO USA LLP accountants for their improper professional conduct during an audit of an exchange-listed insurance company. According to the SEC’s order, BDO fell behind schedule while conducting its 2013 integrated audit of AmTrust Financial Services Inc. and ultimately failed to complete necessary audit procedures before AmTrust’s deadline to file its annual report with the SEC. To create the appearance that BDO’s audit was in fact complete, the senior manager on the audit engagement, Lev Nagdimov, instructed BDO’s audit team to sign off on all work papers and audit programs regardless of whether its work was finished. Nagdimov further instructed BDO’s audit team to load and sign blank or placeholder work papers in BDO’s electronic files. Consistent with Nagdimov’s instructions, the audit team improperly “predated” audit documentation by signing blank or incomplete work papers and audit programs. After AmTrust filed its 2013 annual report, the audit team finished its necessary audit procedures and preserved the predated sign-offs in BDO’s electronic files by overwriting existing documentation in the placeholder work papers. BDO was required to produce an earlier snapshot of its work papers from the period when the “predated” documents were in place, pursuant to an SEC request. The SEC identified the audit deficiencies and predated work papers by comparing BDO’s final, archived work papers to the snapshot of the work papers as they existed at the time that BDO released its audit report. The SEC’s order also found that if BDO’s engagement partner Richard J. Bertuglia and engagement quality review partner John W. Green had properly exercised due professional care, they would have identified these audit deficiencies before they released BDO’s audit report, which provided unqualified opinions on AmTrust’s 2013 financial statements and internal control over financial reporting. “Auditors are entrusted with significant responsibility when auditing public companies,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office. “Public accountants who manipulate their files to conceal audit deficiencies represent a serious breach of those professional obligations, and the Commission will impose suspensions to protect investors.” The SEC’s order finds that Nagdimov, Bertuglia, and Green violated auditing standards established by the Public Company Accounting Oversight Board, and engaged in improper professional conduct within the meaning of Section 4C(a)(2) of the Exchange Act and Rule 102(e)(1)(ii) of the SEC’s Rules of Practice. Without admitting or denying the findings in the SEC’s order, Nagdimov, Bertuglia, and Green each agreed to be suspended from appearing and practicing before the SEC as accountants, which includes not participating in the financial reporting or audits of public companies. The SEC’s order permits Nagdimov to apply for reinstatement after five years, Bertuglia to apply for reinstatement after three years, and Green to apply for reinstatement after one year. The SEC’s investigation was conducted by Christopher W. Ahart, Michelle Lama, Keith J. Hunter, and David R. King and supervised by Eric R. Werner and Jim Etri of the Fort Worth Regional Office.