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US Securities and Exchange Commission

SEC Issues Staff Statement to Assist Companies Affected by Permanent Bar of Audit Firm BF Borgers

Soyoung Ho  Senior Editor, Accounting and Compliance Alert

· 5 minute read

Soyoung Ho  Senior Editor, Accounting and Compliance Alert

· 5 minute read

The Securities and Exchange Commission (SEC) staff on May 3, 2024, issued a statement to assist public companies that were affected by the commission’s permanent ban against audit firm BF Borgers CPA PC for massive fraud, which affected more than 1,500 filings with the commission from January 2021 through June 2023.

The statement reminds companies of various disclosure and reporting obligations, including the requirement for companies to file Form 8-K when the auditor is dismissed or resigns. And affected companies will have to find another auditor that is registered with the Public Company Accounting Oversight Board (PCAOB) and in good standing.

BF Borgers had over 110 public company audit clients, according to its 2023 annual report filed with the PCAOB. A well-known client was Trump Media & Technology Group.

The securities regulator said the accounting firm and owner Benjamin Borgers agreed to pay a $12 million and $2 million penalty, respectively, to settle charges for “deliberate and systemic failures to comply with” PCAOB standards.

BF Borgers did not have a known counsel and did not respond to a request for comment. The firm is in Lakewood, Colorado.

Staff Statement

The statement, written by the SEC Division of Corporation Finance and the Office of the Chief Accountant, said that Form 8-K must be filed within four business days of auditor dismissal or resignation, and companies must include information required by Item 304 of Regulation S-K, Changes in and disagreements with accountants on accounting and financial disclosure.

Companies can indicate that BF Borgers is not permitted to practice before the commission instead of including a letter from the firm stating whether it agrees with the Item 304 disclosures, the SEC staff states.

In terms of reports that need to be filed under the Securities Exchange Act of 1934, companies cannot include audit reports by BF Borgers for Form 10-Ks on or after May 3, the date of the commission’s order that institutes the permanent bar. This also applies to Form 10-Qs for quarterly reports and Form 20-Fs, which are filed by foreign private issuers.

The statement notes that Exchange Act reports filed before May 3 do not need to be revised because of the commission’s order. “However, issuers should consider whether their filings may need to be amended to address any reporting deficiencies arising from the BF Borgers engagement,” the staff said.

PCAOB Inspections: 100% Audit Deficiency Rates

BF Borgers had 100% audit work deficiency rate, according to the 2022 inspection report issued by the PCAOB. The deficiency rate was also 100% for 2021 inspection. In 2019, it was 89%.

The board does not review all audits and selects audits to review largely based on risk assessments. In 2022, the PCAOB reviewed 11 audits, 10 in 2021, and nine in 2019.

In 2022 inspection, the PCAOB said that BF Borgers “did not perform sufficient testing related to a significant account or disclosure or to address an identified risk” in all 11 audits reviewed.

The SEC staff said that they understand that some companies might face difficulties meeting filing deadlines for Exchange Act reports and reminded them of Rule 12b-25, Notification of Late Filing. This gives companies a limited extension if they file the notice no later than one business day after the original due date for the report.

The staff will continue to monitor the disruption and encouraged companies and market participants to get in touch with the staff with questions or concerns.

The registration statement must also comply with the rules in the Securities Act of 1933.

“In evaluating any request for acceleration of a … registration statement, the staff must consider the adequacy of the disclosure in the filing as well as the public interest and the protection of investors,” the staff said. “Before the staff could grant such a request…, any issuer with a pending registration statement that contains or incorporates by reference financial information audited or reviewed by BF Borgers would need to file a pre-effective amendment to include financial information audited or reviewed” by a firm that can practice before the commission.

Further, a company that has submitted a draft registration statement—which includes an audit opinion or consent from BF Borgers—for confidential review by the staff, must retain a qualified accountant to audit the financial information before publicly filing the registration statement.

In addition, for companies with effective Securities Act registration statements, any sales must be preceded or accompanied by a prospectus, which must not include misleading statements.

The SEC staff said that any companies that have pending Regulation A offering statements that had BF Borgers audit their financial statements previously will need to file a pre-qualification amendment to include financial statements audited by a qualified accountant.

“Issuers with ongoing Regulation A offerings are reminded that a qualified offering statement must not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading,” the SEC staff states.


This article originally appeared in the May 6, 2024, edition of Accounting & Compliance Alert, available on Checkpoint.

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