SEC Hires a Company It's Investigating

But BearingPoint's problems didn't stop at U.S. shores. The consultantcy's overseas operations raised a different set of concerns about circumventing controls. The audit committee reported that financial controls were evaded by employees in the company's Asia Pacific operation, motivated "by a desire to meet a [c]ompany objective of increased utilization for the [c]ompany's operations in China and Japan." The audit committee found that much of the misconduct relating to financial reporting practices in the Asia Pacific region during 2004 could be attributed to "the wholly deficient 'tone at the top' set by former regional manager," that included the "padding of utilization numbers." A change in management was made to those divisions, according to regulatory filings.

Nevertheless, the audit committee probe identified a second set of potential problems in Asia, this time exposing the company to Foreign Corrupt Practices Act (FCPA) violations through a subcontractor in China. Although the internal investigation concluded that BearingPoint didn't engage in conduct that violated the anti-bribery provisions of the FCPA, the company's internal controls relevant to the FCPA presented "an unacceptable level of risk of exposure for the [c]ompany."

According to BearingPoint's Lunceford, the SEC has not completed its investigation of the company. BearingPoint is the spinoff company created when Big Four auditor KPMG divested its consulting arm.

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