SEC

SEC fines Mattel $3.5 million for accounting errors

SEC is looking at auditors in some financial misstatement cases
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The SEC is not playing.

Toy maker Mattel Inc. has agreed to pay a $3.5 million fine to settle charges of financial misstatement, according to the Securities and Exchange Commission.

The SEC said in a news release that the California-based company had understated tax-related valuation allowances and overstated tax expenses in 2017, which led to a $109 million restatement in November 2019. The SEC also dinged Mattel for not catching the mistake because of a lack of an “internal control specifically related to calculating a valuation allowance.” The error possibly cost then-Mattel CFO Joseph J. Euteneuer his job.

Mattel did not admit or deny the charges in the settlement, but did cooperate with the investigation, according to the SEC.

The SEC also launched a lawsuit against auditor Joshua Abrahams, a former PwC partner, to “determine whether he engaged in improper professional conduct and violated auditor independence rules” in the case. The SEC alleges that Abrahams caught the error, but didn’t report it and didn’t maintain professional independence in his relationship with Euteneuer.

Several other auditors have come under SEC scrutiny lately. In late September, the agency charged audit firm RSM and three of its senior executives with “improper professional conduct” for not catching a multi-year fraud at Revolution Lighting Technologies. That same week, Deloitte China, a China-based branch of the Big Four firm, agreed to a $20 million SEC fine for allegedly asking clients “to select their own samples for testing and to prepare audit documentation purporting to show that Deloitte-China had obtained and assessed the supporting evidence for certain clients’ accounting entries.”—DA

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