SEC and Arthur Andersen Partner Settle 2000 Audit Case

The Securities and Exchange Commission announced a settlement where former audit partner Fred Gold will pay a $100,000 fine and be permanently barred from practice before the SEC. The settlement dates to an inventory fraud by American Tissue. The SEC asserted that Gold should have found that assets and earnings were overstated; additionally, he was found to have altered workpapers which were part of a peer review and destroyed documents when a subsequent firm discovered inflated inventory.

The SEC settlement against Gold and fellow American Tissue auditors John Parson and Brendon McDonald are definitely cautionary tales of the dangers of audit failure and this settlement is likely to be added to the legal liability section of future auditing textbooks. I knew that Andersen was devastated by the shortcomings in auditing Enron; I guess that I was not aware of other companies where Andersen's audits came up this short.