Tag: financial restatement
SEC charges Fluor with improper accounting and inadequate internal accounting controls
In this Order, the SEC brought settled charges against Fluor Corporation, a global engineering, procurement and construction company listed on the NYSE, in connection with alleged improper accounting on two large-scale, fixed-price construction projects. Five current and former Fluor officers and employees were also charged. (The press release includes links to the orders for the five individuals.) Fixed-price contracts mean that cost overruns are the contractor’s problem, not the customer’s, and Fluor’s bids on the two projects were based on “overly optimistic cost and timing estimates.” When Fluor experienced cost overruns, the SEC alleged, Fluor’s internal accounting controls failed, with the result that Fluor used improper accounting for these projects that did not comply with the percentage-of-completion accounting method under GAAP, leading Fluor to materially overstate its net earnings for several annual and quarterly periods. A restatement ultimately followed. Fluor agreed to pay a civil penalty of $14.5 million and the officers to pay civil penalties between $15,000 and $25,000. According to the Associate Director in the Division of Enforcement, “[d]ependable estimates and the internal accounting controls that facilitate them are the backbone of percentage of completion accounting and are critical to the accuracy of the financial statements that investors rely on….We will continue to hold companies and individuals accountable for serious controls failures and resulting recordkeeping and reporting violations.”
Are springing penalties a thing? SEC charges Plug Power with accounting, reporting and control failures
In this Order, the SEC brought settled charges against Plug Power, Inc., a provider of green hydrogen and hydrogen-fuel-cell solutions, for financial reporting, accounting and controls failures in connection with a variety of the Company’s complex business transactions. The failures required Plug to restate its financial statements for several years. In the restatement, Company management identified a material weakness in internal control over financial reporting and ineffective disclosure controls and procedures, allegedly “due to Plug Power’s failure to maintain a sufficient complement of trained, knowledgeable personnel to execute their responsibilities for certain financial statement accounts and disclosures. Despite these control deficiencies, the Company raised over $5 billion from investors during the relevant Filing Period.” According to the SEC, Plug’s “material weakness in ICFR and ineffective DCP have not been fully remediated,” and the Company is continuing its remediation efforts. Plug agreed to pay a civil penalty of $1.25 million and to implement a number of undertakings, including an undertaking “to fully remediate the Company’s material weakness in ICFR and ineffective DCP within one year” of the SEC’s Order. Should Plug fail to comply with those undertakings, the Company will be required to pay a “springing penalty,” an additional civil penalty of $5 million.
Study shows financial restatements are “handbooks of trickery” for copycat peer companies
by Cydney Posner No, it’s not from The Onion. According to a study reported in CFO.com, unless the restating company faces regulatory action or shareholder litigation, the company’s competitors may use its financial restatement as a how-to guide. The study found that, instead of driving peer companies to examine their […]
You must be logged in to post a comment.