SEC’s Auditor Crackdown Continues as SEC Permanently Suspends Audit Firm BF Borgers for “Massive Fraud.” SEC Investigations Into Hundreds of BF Borgers’s Clients May Be Next.

May 7, 2024  . Written By  Ari Yampolsky

The U.S. Securities and Exchange Commission (SEC) on May 3, 2024, imposed a massive penalty on the public accounting firm BF Borgers CPA PC and its owner, Benjamin Borgers, for alleged misconduct in auditing the financial statements of hundreds of clients, which included Trump Media. The firm agreed to pay a $12 million civil penalty, while Borgers agreed to pay $2 million. Both were permanently barred from practicing before the SEC, effectively prohibiting them from auditing publicly traded companies in the future.

The SEC accused BF Borgers of a "deliberate and systematic" failure to comply with auditing standards set by the Public Company Accounting Oversight Board (PCAOB). The agency claimed that the firm engaged in a "sham auditing mill" by failing to meet industry standards in reviewing the financial statements of its clients.

According to the SEC's allegations, BF Borgers falsified audit documents, including workpapers that form the basis of an auditor's opinion. The firm allegedly authorized auditing staff to copy and paste workpapers from previous audits, only changing the dates, without performing the necessary audit steps. In some instances, the firm claimed to have held required planning meetings with clients to discuss risk areas, when in fact, such meetings never took place. BF Borgers’s clients collectively filed over 1,600 quarterly and yearly financial statements and registration statements that were signed off on without the necessary review, according to the SEC.

BF Borgers is the latest auditing firm caught in the crosshairs of the SEC’s crackdown on shoddy auditors.  The SEC has aggressively ramped up enforcement actions against auditing firms since 2023.  For example, the SEC sued FTX's auditor, Prager Metis CPAs LLC, for allegedly failing to comply with auditor independence rules. And it forced Marcum LLP to pay $13 million to settle claims that it conducted faulty audits on hundreds of special-purpose acquisition companies (SPAC) by understaffing audit teams and failing to vet the leaders of its public-company clients.

Should a company that used BF Borgers as its auditor be worried that the SEC may soon come knocking?  In a word, yes. The SEC proactively encouraged the 330 issuers and 20 broker-dealers that BF Borgers audited between 2021 and 2023 to consider amending their financial statements.  And it cautioned that BF Borgers’s clients may have violated the Exchange Act by filing financial statements that had not been properly audited or reviewed by an independent public accountant.

Many public companies may have innocently hired BF Borgers. But others may have selected BF Borgers because they have something to hide.  Public companies that engage in fraud, accounting tricks, or other misconduct don’t want auditors that will pry open their businesses, push back on finance executives, and flag matters of concern to stakeholders.  Instead, they look for an auditor willing to "completely abandon" its role in ensuring the reliability of financial statements, as the SEC’s Enforcement Director memorably said of BF Borgers.

Whistleblowers play an indispensable role in helping the SEC find and stop financial frauds.  The SEC’s Whistleblower Program protects whistleblowers from retaliation and pays significant rewards for tips that lead to penalties against violators. If you would know of misconduct by auditors like BF Borgers or any of the public companies it served, please contact us for a confidential consultation.