The Public Company Accounting Oversight Board has disciplined two former auditors at BDO Seidman for failing to review the audit work of a junior member of the firm and then trying to cover up by backdating documents.

The PCAOB found that Stephen J. Nardi, a partner in BDO's Philadelphia office, assigned audit manager Ann Marie Fitzpatrick to oversee an audit of client Hemispherx Biopharma's financial statements for fiscal year 2004. However, after she completed the audit-planning phase, Nardi directed her to stop working on the Hemispherx audit engagement and concentrate on a larger client.

After she stopped working on Hemispherx, though, she did not supervise or review the work performed by more junior members of the audit team, according to the PCAOB. The fieldwork was completed without the supervision of an audit manager and was never subject to a detailed review as required by BDO policy, said the PCAOB.

Nardi authorized the issuance of BDO's audit report on Hemispherx's financial statements on March 16, 2005, and the report was included with the Form 10K filed that day with the Securities and Exchange Commission.

However, later that year Nardi learned that BDO partners would be performing quality control inspections of his local office and that the Hemispherx audit would be one of the engagements selected for inspection. He asked a subordinate to check the Hemispherx workpapers. The subordinate noted the absence of initials and signatures indicating that a detailed review had been performed.

When Fitzpatrick returned from vacation the following week, Nardi directed her to initial and sign the workpapers and backdate them to dates preceding the issuance of the March audit report, even though she had not done a detailed review.

The PCAOB has barred Nardi from being an associated person of a registered accounting firm, but he may file a petition with the PCAOB after one year for consent to work for a registered accounting firm again. Fitzpatrick, who resigned from BDO in February 2006, was censured by the PCAOB.

"This matter, which took place in 2005, involved two former professionals of the firm," said BDO in a statement. "Upon uncovering the conduct, BDO Seidman immediately launched an extensive internal investigation, conducted by outside counsel, and appropriate corrective measures were taken by the firm."

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