SEC Again Cites Accountant in Fraud Enforcement

Regulators also disciplined William Finkelstein, the company's former chief financial officer, and Stanley Silverstein, Warnaco's former general counsel.

"An issuer's filings cannot give misleading reasons for its financial results and must disclose material information to investors," said SEC Associate Director Antonia Chion in announcing the enforcement actions.

The administrative orders filed in the case show that Warnaco's former senior management, including Wachner, was successful in persuading Pricewaterhouse to go along with the restatement mischaracterization, even though the auditors had discovered problems in the company's inventory accounting.

The regulators charge PricewaterhouseCoopers went along with Warnaco's deception, even though one of the firm's audit partners had told the apparel executives that the press release they intended to file announcing the reason for the restatement was "inconsistent."

Ever since Arthur Andersen was found to have been an intimate player in the accounting fraud at Enron, the SEC and federal prosecutors have been taking a much tougher stance with auditors on issues of integrity and independence.

Last year, the SEC charged KPMG with fraud in connection with its past audits of Xerox(XRX). Regulators also charged four of the firm's partners in that case, which KPMG is challenging.

This past September, former Ernst partner Thomas Trauger was charged by federal authorities with obstruction of justice for allegedly destroying audit working papers stemming from the firm's work for NextCard, a credit card company.

In the most serious blow to the accounting profession, federal prosecutors won an obstruction-of-justice conviction against Arthur Andersen in the Enron scandal, a legal victory that effectively shut down what had been one of the world's largest audit firms.

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