Here’s a reminder from the SEC: interim financial statements included in Forms 10-Q are required to be “reviewed” by outside auditors. On Friday, in a first enforcement proceeding of its kind, the SEC announced charges against five companies that had filed their 10-Qs with their quarterly financial statements prior to review by their independent external auditors.
Although interim financial statements are not required to be audited, under Reg S-X, prior to filing with the SEC, an issuer must have an independent registered public accounting firm conduct a review of the required interim financial information in accordance with the standards of the PCAOB and SEC rules. The press release indicates that the SEC’s proceedings “resulted from a review of filings, staff comment letters and other metrics that indicated potential violations.” The SEC orders noted that the Forms 10-Q did not disclose that the interim financial statements had not been reviewed. In most of the cases, the companies had later—sometimes much later—filed amended 10-Qs with reviewed financial statements. Each company agreed to settle the charges, and, collectively, they were assessed $250,000 in penalties, apparently assessed based largely on the number of violations.