Crowe U.K., along with its CEO and a senior auditor, have agreed to settle charges by the U.S. Securities and Exchange Commission over its audit of a music streaming company.
The SEC's order says that the Crowe U.K. audit team that gave music streaming company Akazoo Limited a clean bill of health for 2018 had almost no training in Public Company Accounting Oversight Board standards. The London-based auditor overlooked red flags and failed to exercise appropriate professional skepticism regarding things like company agreements and confirmation letters that turned out to be fabricated.
It was discovered in 2019, after Akazoo went public, that the company had falsely claimed $120 million in revenue, when in reality its revenues had been negligible.
Besides the firm, the SEC also charged CEO Nigel Bostock and senior auditor Matthew Stallabrass. Bostock, the engagement partner on the audit, didn't appropriately supervise the engagement, maintain adequate documentation or exercise due professional care, according to the order, while Stallabrass, who was the engagement quality reviewer, failed to conduct a sufficient quality review.
"Crowe U.K.'s failure to properly audit Akazoo contributed to the air of legitimacy that allowed Akazoo to become a publicly traded company," said Eric Werner, the regional director of the SEC's Fort Worth Regional Office, in a statement. "We will continue holding gatekeepers accountable, especially those whose professional failings allow financial frauds to enter our public markets."
Without admitting or denying the findings, the firm, Bostock and Stallabrass agreed to pay penalties of $750,000, $25,000, and $10,000, respectively. Crowe U.K. also agreed to be censured, pay disgorgement and prejudgment interest, and to voluntarily withdraw its PCAOB registration. Bostock and Stallabrass are suspended from appearing or practicing before the SEC as accountants, for at least five years and two years, respectively.
