Jun 04, 2024

The SEC’s Order Against BF Borgers: Steps for U.S. Companies to Take to Deal with the Fallout

General Counsel By Zhongyuan Zheng, Lucy Zou

On May 3, 2024, the Securities and Exchange Commission (the “SEC”) issued an order instituting settled administrative and cease-and-desist proceedings (the “Order”) against audit firm BF Borgers CPA PC and its owner, Benjamin F. Borgers, CPA (individually and together, “BFB”). The Order has significant implications for U.S. companies that have used or are currently using BFB as an auditor.


In the Order, the SEC alleges that BFB had:

  • engaged in “the deliberate and systemic failure to audit and review public company and SEC-registered broker-dealer clients’ financial statements in accordance with Public Company Accounting Oversight Board (“PCAOB”) standards, and their fraudulent issuance of audit reports falsely representing that they had done so from at least January 2021 through at least June 2023;”
  • “failed to obtain an [engagement quality reviewer] to provide a concurring review and approval on audits and reviews of financial statements incorporated in at least 1,625 public filings and disclosures from January 2021 through June 2023” as required by PCAOB Auditing Standard 1220: Engagement Quality Review;
  • “violated PCAOB Auditing Standards 1201: Supervision of the Audit Engagement . . . and 1215: Audit Documentation . . . by failing both to adequately supervise and review the work of the engagement teams and to ensure that the workpapers properly documented that work on many of these engagements”; and
  • “falsely represented . . . to their clients that the audits and quarterly reviews of their financial statements would be conducted in accordance with PCAOB standards, and, with respect to the audits, issued reports falsely certifying that the audits were completed in accordance with those standards.”

The Order assesses penalties totaling $14 million against BFB. In addition, the Order permanently suspends BFB from being able to practice before the SEC. A Statement by the SEC staff explains that, as a result of the permanent suspension, “[BFB] may not participate in or perform the audit or review of financial information included in [SEC] filings, issue audit reports included in [SEC] filings, provide consents with respect to audit reports, or otherwise appear or practice before the [SEC].”

The Order has significantly impacted companies that have engaged BFB to conduct an audit or review of financial information that will be required to be included in filings with the SEC. As the SEC staff Statement explained, BFB’s permanent suspension means that “issuers that have engaged [BFB] to audit or review financial information to be included in any Exchange Act filings to be made on or after the date of the Order will need to engage a new qualified, independent, PCAOB-registered public accountant.”

Thus, companies all companies that have engaged BFB to audit or review financial statements in any SEC filings will need to engage a new, qualified, independent, PCAOB-registered public accountant firm as soon as possible. Also, companies that need to incorporate an audit or review previously prepared by BFB into a current or future SEC filing will need to engage a new auditor to re-do that prior BFB audit or review.

Given the wide impact of the Order, on May 20, 2024, the SEC issued an exemptive order providing an extension to certain companies affected by the Order and subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The exemptive order provides that, for any SEC reporting company that notified the SEC between May 3, 2024, and May 16, 2024 pursuant to Rule 12b-25 of its inability to timely file a quarterly or transition report on Form 10-Q due to the Order, the Form 10-Q will be deemed to be filed on its prescribed due date as long as it is filed no later than the thirtieth calendar day (instead of the fifth calendar day) following the due date. It will provide affected SEC reporting companies with an additional period of time to hire a new, qualified, independent, PCAOB-registered public accountant and file financial information with the SEC that complies with the requirements of the federal securities laws.

While the exemptive order does not cover other upcoming periodic filings, it is probable that the SEC is taking a “wait and see” approach and will decide later whether to give companies more time to file these reports.


If your company has engaged BFB at any time in the past, we believe there are several steps to take and potential claims to examine to address the fallout from the Order.

  • If BFB is your current auditor, dismiss BFB as your company’s auditor promptly. If you have any ongoing offering involving BFB as your auditor, you should suspend the offering until a new auditor can be engaged and can audit or review the financial information in the offering documents.
  • If BFB is dismissed or, before dismissal, voluntarily resigns as your company’s auditor, document that dismissal with the filing of an Item 4.01 Form 8-K within four business days. The company should appoint a new auditor as soon as practicable and document the replacement with a subsequent Item 4.01 Form 8-K within four business days.
  • In light of the SEC’s charges against BFB, any BFB audit or review of your company’s financial statements, including those included or incorporated into SEC filings in the last three fiscal years, may not be reliable. Therefore, the company should engage a new auditor to re-do those prior BFB audits or reviews under PCAOB standards. The company or the new auditor must also determine whether it is necessary to re-do previous audits and reviews in previous SEC filings, even if such financial statements will not be required to be included or incorporated into subsequent SEC filings.
  • If any previous financial statements audited or reviewed by BFB are determined to be materially unreliable and to require restatements, a number of additional filings and actions may become required, including the filing of a Form 8-K, amendments to previous periodic filings, filing extensions for future affected filings to allow additional time to make the required future periodic filings, and any required clawbacks under your company’s Clawback Policy.
  • If your company has a shelf registration statement on Form S-3, it will automatically incorporate the information in each Item 4.01 Form 8-K. If your company determines appropriate, the Form S-3 may also be post-effectively amended or supplemented to add appropriate risk factor disclosure, such as the possibility that previous audit reports and financial statements are not reliable.
  • Examine your company’s insurance policies, including any crime/fraud, D&O, or umbrella policies, crime/fraud insurance policy to determine whether your company has any coverage for BFB’s conduct.
  • Consider making a demand to BFB for the return of all audit fees your company paid to BFB during its engagement as your company’s auditor or for the fees charged by a new auditor to re-do BFB’s past audits and reviews, on the basis that BFB’s wrongful conduct or malpractice caused these fees. You may ultimately need to sue BFB to get recovery.
  • If BFB ultimately files for bankruptcy, ensure that your company tracks the proceedings and reviews BFB’s filings regarding scheduled claims. This document will set forth the amount of claims of which BFB is aware, and how many of the claims with which it agrees with. In any event, your company should make a claim for the full amount to which it believes it is entitled.

Call Bevilacqua For Help Today

As always, we appreciate the opportunity to work with you as counsel and are available to discuss your obligations and options in light of the SEC’s Order against BFB. Please contact Steve Aquino at or 202-793-3576 with any questions.