“Audit and national office professionals must appropriately address known deficiencies in their auditing of high-risk areas, and auditors must have the fortitude to refuse to sign off on an audit if important issues remain unresolved,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “Ernst & Young failed to ensure that material post-closing accounting adjustments were justified by appropriate audit evidence, leading to a significant audit failure.”

Ernst & Young, as well as the audit partner Craig Fronckiewicz and a former tax partner who was part of the audit engagement team named Sarah Adams, consented to the SEC’s order without admitting or denying the findings that they engaged in improper professional conduct during the audits and quarterly reviews and caused Weatherford’s reporting violations. Ernst & Young agreed to pay disgorgement of $9 million, prejudgement interest of $1.8 million, and a penalty of $1 million. The partners Fronckiewicz and Adams agreed to be suspended from appearing or practicing before the SEC as accountants, which includes not participating in the financial reporting or audits of public companies. The SEC’s order permits Fronckiewicz to apply for reinstatement after two years and Adams to apply for reinstatement after one year.

This is the latest piece of bad news that has dogged Ernst & Young over the past few months. In September the SEC faulted the firm for getting too chummy with its clients--in one case the audit partner became very good friends with the client's CFO to the point of taking family vacations together, and in the other an audit partner developed a romantic relationship with an executive in the company she was auditing. Meanwhile in August a federal judge struck down a clause in the firm's employment contract barring workers from taking part in class action lawsuits for work-related claims.