BF Borgers Securities Enforcement Case: One Staff Member, Every Sign-Off

In the BF Borgers securities enforcement case, the audit firm agreed to pay a $12 million civil penalty to settle the Securities and Exchange Commission’s charges of fabricated audit documentation and false claims of compliance with auditing standards. Its owner agreed to a separate $2 million civil penalty. The Commission’s settlement announcement reported immediate, permanent suspensions of both from appearing and practicing before it as accountants.

BF Borgers CPA PC was an accounting firm in Lakewood, Colorado, registered with the Public Company Accounting Oversight Board. The Commission’s May 3, 2024 order addressed the firm and its owner and managing partner, whose work included public-company and broker-dealer audits and reviews. This page follows their audit documentation into the filings clients made. Our broader page on auditors and securities fraud gatekeepers covers the oversight roles and other ways an audit can conceal the problem it should expose.

The BF Borgers Workpapers Recorded Work That Never Happened

The Commission found that the owner directed BF Borgers staff to copy prior audit and quarterly-review workpapers into new engagements, change the dates and leave the substantive work descriptions in place. According to the order, the resulting files represented procedures and approvals that had not occurred.

The order describes a workpaper called “Engagement Team Discussion,” which purported to record a planning meeting at the start of the engagement. Such a meeting should bring the team, including the engagement partner, together to discuss the client’s business and the risks of significant errors or fraud in its financial statements. According to the order, those meetings did not happen at BF Borgers. A staff auditor rolled the form forward and supplied a new meeting date. The calendar moved. The meeting never arrived.

The Commission described the same practice in the “Supervision Review and Approval” workpaper at the other end of the work. It listed review tasks for the staff auditor, engagement partner and engagement quality reviewer, with spaces to indicate whether each task had been completed. The order found that staff copied the prior period’s check marks and typed the partner’s and reviewer’s names on their signature lines. The form appeared to document both completed procedures and the people who approved them.

Electronic approvals supplied another layer of apparent verification. The order found that the owner gave a staff member usernames to make sign-offs appear to come from the staff auditor, engagement partner and quality reviewer. The Commission described who supplied those approvals:

If your name appears beside work you never reviewed, you can explain something the completed form conceals. In the Commission’s account, we see independent review reduced to one person’s keystrokes.

The Independent Review Behind an Audit Approval

An engagement quality review is an independent, objective evaluation of the audit team’s significant judgments and conclusions. As the BF Borgers order explains, an audit firm may let a client use its audit report only after the quality reviewer approves issuance.

The Commission found that the owner rarely interacted with staff auditors, failed to give them the required direction about the work and client, and failed to review important workpapers. Some of those unreviewed papers purported to document his own supervision. For an audit employee, the relevant details are the instructions received, the questions actually discussed and the work a reviewer examined before approval appeared.

How Many Filings Did the BF Borgers Case Affect?

The Commission identified at least 1,625 public filings and disclosures incorporating audits or reviews without the required engagement quality review from January 2021 through June 2023. The order described that group as at least 75% of the clients’ public filings and disclosures incorporating the firm’s audits and reviews. The missing review reached annual reports, quarterly filings and registration statements, including work for public companies and registered broker-dealers, as well as OTC company annual reports.

What Did the SEC Find About BF Borgers’ Clients?

The Commission found that BF Borgers and its owner caused certain public-company clients to violate their reporting obligations by filing financial statements that had not been audited or reviewed under PCAOB standards. The order made a corresponding finding about certain registered broker-dealer clients and their annual financial statements. The audit firm’s false assurances therefore traveled into documents clients were required to file.

The promises began before the reports went out. The order found that engagement letters told clients the audits and quarterly reviews would follow PCAOB standards, while the audit reports certified that the audits had followed them. The Commission found that the firm and owner knew clients would include those reports in filings available to investors.

Inside a public company, the reporting process runs from transactions and accounting entries through estimates, the financial close and the statements. Management prepares the reports, the audit committee oversees the external auditor, and the auditor’s workpapers support its opinion. Those roles leave different records behind the reported numbers, including reconciliations, report versions, committee minutes and auditor communications. Someone on the client side may know what information reached the auditor and what the auditor asked about, while someone inside the audit firm may know how the file recorded the response.

What an Insider Can Add to the BF Borgers Audit Trail

An insider can connect the finished workpaper to the people and decisions behind it. In the Commission’s account, the revealing details included instructions to copy earlier files, substituted reviewer names and electronic approvals entered through supplied usernames. A person familiar with those steps can explain why an apparently complete audit file tells the wrong story.

The order says audit records, including relevant correspondence, had to be retained for seven years. It describes the owner’s claim that his emails were the only written records showing what he had done as engagement partner, but the firm did not include those emails in its retained workpapers. The Commission found that the vast majority of his emails predating March 2023 had been allowed to auto-delete because of purported storage limitations. The emails disappeared. The approvals survived.

A different audit decision appears in BDO’s admitted handling of conflicting bank and management information about a purported deposit at General Employment Enterprises. BDO demanded an independent investigation, withdrew that demand without a reasonable explanation and issued audit opinions presenting the financial statements as fairly stated. The useful parallel is the decision behind the final assurance: who encountered the problem, what review was promised and how the firm nevertheless reached approval.

Whistleblower Knowledge Can Change Accounting-Fraud Incentives

Research on accounting fraud gives a wider reason to take an insider’s knowledge seriously. The 2019 working paper Do Corporate Whistleblower Laws Deter Accounting Fraud?, hosted by MIT Sloan, examined companies exposed to state whistleblower laws through state pension-fund ownership. It found a 5% to 9% reduction in estimated accounting-fraud probability after that exposure, using financial-statement measures of manipulation risk. Its finding concerns the incentive created when someone inside a company can reveal what the accounts conceal.

For someone working in audit or compliance, your role and how you learned about the conduct are exactly the questions we work through with you. We examine the difference between the review recorded and the work performed. Knowing who supplied an approval can be as important as knowing which number was wrong.

Whistleblowers can share 10% to 30% of qualifying sanctions collected in an SEC action with monetary sanctions exceeding $1 million. For separate fraud against government money, a whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. We work out with you which whistleblower program fits what you know.

You Know Who Actually Reviewed the File

If you saw approvals entered for absent reviewers or old work passed off as a new audit, talk with our whistleblower experts about what happened inside the file. We build the case around that knowledge, bring in securities fraud whistleblower lawyers who understand audit workpapers and public reporting, and stay beside you through the case.