April 18, 2013
CFTC Charges Accounting Firm Tunney & Associates, P.C. and Its Sole Owner Michael Tunney with Failing to Properly Audit a Registered Futures Commission Merchant
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a Complaint against Tunney & Associates, P.C. (Tunney & Associates), an accounting firm with offices in Hammond, Indiana and Orland Park, Illinois, and Michael Tunney (Tunney), its sole owner and a certified public accountant (CPA) licensed in Illinois and Indiana, alleging violations of the CFTC’s Regulations related to conducting audits for The Linn Group, Inc. (TLG), a registered Futures Commission Merchant (FCM).
According to the Complaint, filed in the U.S. District Court for the Northern District of Illinois, Tunney & Associates served as TLG’s independent auditor and conducted TLG’s required year-end audits for 2007 through 2011. The Complaint alleges, however, that neither Tunney & Associates nor Tunney had any experience auditing FCMs or any entity that holds customer segregated accounts, and neither was qualified to conduct an FCM audit, and that Tunney had no understanding of the applicable Commodity Exchange Act or CFTC regulatory provisions prior to accepting any of the audit engagements. The Complaint states that Tunney & Associates and Tunney improperly relied on a non-employee, non-CPA, to perform all of the work on TLG’s 2007 through 2010 audits, and that Tunney conducted TLG’s 2011 audit on his own, despite the fact that he was not qualified to conduct an FCM audit.
The Complaint also alleges, among other things, that Tunney & Associates’ audits did not comport with Generally Accepted Auditing Standards (GAAS) or CFTC Regulations. For example, there was no planning for the auditing of TLG, and the audits failed to include appropriate tests of TLG’s accounting system, internal accounting controls, and procedures for safeguarding customer and firm assets.
TLG has entered into a settlement with the CFTC in connection with its failure to properly handle, monitor, and report customer funds it maintained as required by the Commodity Exchange Act (Act) and Regulations, and for supervision failures. As part of the settlement, TLG agreed to a $400,000 civil monetary penalty and retention of a consultant to review and improve TLG’s procedures as necessary to comply with the Act and Regulations (see CFTC Press Release 6570-13, April 18, 2013). TLG terminated the services of Tunney & Associates prior to entering into a settlement with the CFTC.
David Meister, the CFTC’s Director of Enforcement, stated, “Auditors are gatekeepers who perform a key role in a system designed to promote market integrity and protect market participants. An accountant who assumes the role of independent auditor for a CFTC registrant must be capable of satisfying his professional obligations. The audit function is meant to do more than earn the auditor a paycheck.”
In the litigation, the CFTC seeks disgorgement of all benefits Tunney & Associates and Tunney received as a result of their conduct, civil monetary penalties, and permanent injunctions against further violations of the Commodity Exchange Act and Regulations, as charged.
The CFTC appreciates the assistance of the Division of Swap Dealer and Intermediary Oversight. The CFTC also appreciates the assistance of the National Futures Association.
The CFTC Division of Enforcement staff members responsible for this matter are Allison Passman, Joseph Patrick, Susan Gradman, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.
Last Updated: April 18, 2013