SEC Charges Private Fund Auditor and Audit Engagement Partner with Improper Professional Conduct

The Securities and Exchange Commission today announced settled charges against Spicer Jeffries LLP, an audit firm based in Denver, and audit engagement partner Sean P. Tafaro, for their improper professional conduct in connection with audits of two private funds.

According to the SEC’s order, during the audit planning stages, Spicer Jeffries and Tafaro assessed that valuation of investments was a significant fraud risk but did not implement the planned audit approach to respond to the risk. The order further finds that Spicer Jeffries and Tafaro failed to obtain sufficient audit evidence about the method of measuring fair value, the valuation models, and whether alternative valuation assumptions were considered. According to the order, due to these failures and others, Spicer Jeffries and Tafaro did not exercise due care, including professional skepticism. The order also finds that Spicer Jeffries’ deficient system of quality control led to failures to adhere to professional auditing standards.

"Auditors are critical gatekeepers that must employ a robust system of quality control to ensure adherence to professional standards," said Andrew Dean, Co-Chief of the Asset Management Unit. "We will continue to take a hard look at gatekeepers to ensure that they are fulfilling their own professional responsibilities, including with respect to private funds."

Without admitting or denying the findings, Spicer Jeffries and Tafaro consented to the SEC’s order finding that they engaged in improper professional conduct. Spicer Jeffries agreed to be censured and to implement undertakings to retain an independent consultant to review and evaluate certain of its audit, review, and quality control policies and procedures. Tafaro agreed to be suspended from appearing and practicing before the SEC as an accountant. The SEC’s order permits Tafaro to apply for reinstatement after one year.

The SEC’s investigation was conducted by Marc D. Ricchiute of the Asset Management Unit and accountant Tracy W. Bowen in the Denver Regional Office, and it was supervised by Kimberly L. Frederick. Brian Fitzpatrick, Asset Management Unit industry specialist, and Denise Saxon and Jeb Wildschut, of the Denver Regional Office, assisted with the investigation.