The U.S. Commodity Futures Trading Commission has filed a complaint against Tunney & Associates, an accounting firm with offices in Hammond, Ind. and Orland Park, Ill., and Michael Tunney, its sole owner and a CPA licensed in Illinois and Indiana, claiming he failed to properly audit a client registered with the CFTC.
The complaint, the commission said Thursday, alleged violations of the CFTC’s regulations related to conducting audits for the Linn Group, Inc., a registered Futures Commission Merchant.
According to the complaint, filed in the U.S. District Court for the Northern District of Illinois,
Tunney & Associates served as Linn’s independent auditor and conducted the required year-end audits for 2007 through 2011. The CFTC alleges, however, that neither Tunney & Associates nor Tunney had any experience auditing Futures Commission Merchants or any entity that holds customer-segregated accounts, and neither was qualified to conduct an FCM audit, and that Tunney had no understanding of the applicable Commodity Exchange Act or CFTC regulatory provisions prior to accepting any of the audit engagements.
The complaint states that Tunney & Associates and Tunney improperly relied on a non-employee, non-CPA, to perform all of the work on TLG’s 2007 through 2010 audits, and that Tunney conducted Linn’s 2011 audit on his own, despite the fact that he was not qualified to conduct an FCM audit.
The CFTC complaint also alleges, among other things, that Tunney & Associates’ audits did not comport with Generally Accepted Auditing Standards or CFTC regulations. For example, there was no planning for the auditing of the Linn Group, and the audits failed to include appropriate tests of Linn’s accounting system, internal accounting controls, and procedures for safeguarding customer and firm assets.
“Auditors are gatekeepers who perform a key role in a system designed to promote market integrity and protect market participants,” said CFTC director of enforcement David Meister in a statement. “An accountant who assumes the role of independent auditor for a CFTC registrant must be capable of satisfying his professional obligations. The audit function is meant to do more than earn the auditor a paycheck.”
Tunney & Associates did not immediately respond to a request for comment.
The Linn Group has entered into a settlement with the CFTC in connection with its failure to properly handle, monitor, and report customer funds it maintained as required by the Commodity Exchange Act and regulations, and for supervision failures.
As part of the settlement, the Linn Group agreed to a $400,000 civil monetary penalty and retain a consultant to review and improve its procedures to comply with the law and regulations. Linn terminated the services of Tunney & Associates prior to entering into a settlement with the CFTC.
In the litigation, the CFTC is seeking disgorgement of all benefits Tunney & Associates and Tunney received as a result of their conduct, civil monetary penalties, and permanent injunctions against further violations of the Commodity Exchange Act and Regulations, as charged.
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