(Finance) – The US Securities and Exchange Commission (SEC) has charged CroweUK (London-based auditing firm), its CEO Nigel Bostock and the senior auditor Matthew Stallabrass for the poor review of the music streaming company Akazoo. Crowe UK, Bostock and Stallabrass have agreed to settle the SEC charges.
Under the SEC order, Crowe UK issued a audit report of the 2018 financial statements by Akazoo. However, after Akazoo went public in September 2019 through a merger with a SPAC, it emerged that the company’s 2018 financial statements they were falsely reporting $120 million in revenuewhen Akazoo actually had only negligible income.
The order finds that Crowe UK claimed it conducted its 2018 audit in accordance with Public Company Accounting Oversight Board (PCAOB) standards when, in fact, its audit team on Akazoo had almost no experience or training on PCAOB standards. Furthermore, the ordinance notes that the audit team overlooked red flags when, for example, did not exercise an appropriate level of professional care or skepticism when Akazoo submitted fake agreements and inauthentic confirmation letters. The order finds that Crowe UK made false statements when it said that Akazoo correctly filed its financial statements.
“Crowe UK’s inability to adequately control Akazoo contributed to the air of legitimacy that allowed Akazoo to become a publicly traded company,” said Eric Werner, regional manager of the Fort Worth office. We will continue to hold gatekeepers accountableespecially those whose professional failures allow financial fraud to enter our public markets.”
Without admitting or denying the SEC’s findings, Crowe UK, Bostock and Stallabrass agreed to settle the charges and pay penalties of $750,000, $25,000 and $10,000respectively.