The firm violated auditor independence rules.
From the CFO.com link:
Ernst & Young LLP agreed to pay more than $2.9 million to the Securities and Exchange Commission to settle charges that it violated auditor independence rules by co-producing a series of audio CDs with a man who was also a director at three of E&Y’s audit clients.
According to the SEC, Ernst & Young collaborated with Mark C. Thompson between 2002 and 2004 to produce a series of audio CDs called The Ernst & Young Thought Leaders Series. The CDs featured E&Y partners interviewing CEOs and CFOs in various different industry sectors, which the SEC says was part of an effort by E&Y to promote its partners as experts in specific industries.
That relationship, said the SEC, violated independence rules because Thompson was serving on the boards at several of E&Y’s clients during the period when the CDs were produced. The SEC censured Ernst & Young and fined the firm $2,918,987. It also censured partner John F. Ferraro for setting up the relationship, and partner Michael G. Lutze for failing to alert one of his audit clients — apparently Best Buy — after learning of the relationship. Lutze was also suspended from practicing before the commission for one year. The SEC also issued a cease and desist order against Thompson. E&Y, Thompson, Ferraro, and Lutze settled with the SEC without admitting or denying its findings in the case.
Thompson is chairman of his own private business, Executive Powertools, a training firm dealing with executive leadership. Although the SEC did not name the audit clients on whose board Thompson served, SEC filings and Thompson’s biography on his own website show that he served as a director for E&Y clients Best Buy, Korn/Ferry, and Teletech Holdings during the period detailed by the SEC, and served on Best Buy’s audit committee from March 2000 to August 2003.
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