The sanctions imposed on Ernst and Young in the PeopleSoft decision seems harsh to some. There is a six-month suspension of acquiring new audit clients, a $1.7 million fine, a continuing review of E&Y independence policies and procedures, and a cease-and-desist order. However, I got the distinct impression that the SEC administrative judge, although appalled by Ernst and Young's failures and noting that hundreds of millions of dollars in revenue was earned by E&Y because of the E&Y/PeopleSoft business relationship, pulled back a bit.
This "hesitancy" was also seen elsewhere in a series of recent GAO reports that openly discussed the concern that we can't afford the demise of another national auditing firm like Andersen. Underlying all this appears to be a hope that the Public Company Accounting Oversight Board's actions will ensure independence is properly maintained at accounting firms, especially national ones that audit the overwhelming majority of public companies.
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