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Auditors Suspended in College of New Rochelle Fallout

February 25, 2021
 
 

Two former KPMG auditors agreed to be suspended from practicing before the U.S. Securities and Exchange Commission after the financial regulator charged them with improper professional conduct during an audit of the since-closed College of New Rochelle in New York.

Christopher Stanley, a former KPMG partner, has the right to apply for reinstatement after three years. Jennifer Stewart, a former senior manager at the auditing firm, can apply for reinstatement after one year. They agreed to be suspended without admitting to or denying the SEC’s findings.

The two were involved in the approval of an unmodified audit opinion for the College of New Rochelle’s 2015 fiscal year financial statements, even though important audit steps had not been completed, according to an SEC news release. KPMG encountered difficulty finishing the audit after the College of New Rochelle’s controller provided inaccurate, incomplete and contradictory information -- but the auditors nonetheless decided to issue a report after the college’s president and controller told them on Nov. 30, 2015, that a report was needed by the end of the day, according to the SEC.

Resulting financial statements overstated the College of New Rochelle’s net assets by $33.8 million, according to the SEC. The statements were published online as a disclosure to bond investors.

“Auditors of municipal issuers are key gatekeepers in upholding the reliability and integrity of financial information provided to investors in municipal bonds,” Matthew S. Jacques, chief accountant of the SEC’s enforcement division, said in a statement. “It is critical that they exercise professional care and skepticism.”

The College of New Rochelle collapsed after its financial problems became clear, announcing its closure in 2019. The SEC charged its by-then-former controller with fraud that year. He was convicted of securities fraud and failure to pay payroll taxes and sentenced to three years in federal prison, according to the Westchester & Fairfield County Business Journals. Currently he is at a Brooklyn halfway house, the business journals reported.

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