SEC Charges CPI Aerostructures, Inc. with Financial Reporting, Accounting, and Controls Violations
ADMINISTRATIVE PROCEEDING
File No. 3-21975
June 20, 2024 - The Securities and Exchange Commission today charged CPI Aerostructures, Inc. (CPI Aero), an aerospace and defense manufacturer, with financial reporting, accounting, and internal controls violations that occurred over a six-year period and resulted in four financial statement restatements. CPI Aero has agreed to settle the SEC's charges.
According to the SEC's order, CPI Aero had multiple material weakness in its internal control over financial reporting (ICFR) and failed to maintain effective disclosure controls and procedures (DCP) for six consecutive annual reporting periods from 2018 through 2023. These failures led to four restatements concerning: (1) a revenue recognition error resulting from incorrect invoice coding, (2) revenue recognition errors resulting from the misapplication of ASC Topic 606, (3) errors in inventory cost accounting, inventory reserves, and allowance for losses resulting from the integration of an acquired subsidiary, and (4) errors in the Income Taxes footnote to the financial statements due to computational errors and incomplete analyses of temporary differences between book and taxable income.
The order also notes that CPI Aero implemented remedial measures. Specifically, CPI Aero took corrective actions to address material weaknesses as they were identified, retained new personnel with expanded expertise in financial reporting, and hired a consultant to assist CPI Aero with identifying, documenting, and testing internal controls.
The SEC's Order finds that CPI Aero violated the financial reporting, accounting, and internal accounting controls provisions of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934, and Rules 12b-20, 13a-1, 13a-11, 13a-13, and 13a-15(a) thereunder. Without admitting or denying the findings, CPI Aero has agreed to a cease-and-desist order and to undertakings to, among other things, fully remediate the company's material weakness in ICFR and have effective ICFR and DCP by December 31, 2024. As set out in the SEC's Order, if CPI Aero fails to satisfy all of the undertakings, the company shall pay a civil penalty of $400,000.
The SEC's investigation was conducted by Ellen Bortz and Amanda de Roo and supervised by Paul Pashkoff and Melissa Hodgman.
Last Reviewed or Updated: June 20, 2024