The CFTC has filed a complaint against Tunney & Associates, an accounting firm with offices in Indiana and Illinois, for failing to properly audit a registered Futures Commission Merchant. Michael Tunney, the firm’s sole owner and a certified public accountant, allegedly violated CFTC Regulations related to conducting audits for The Linn Group, Inc., a registered Futures Commission Merchant.
According to the CFTC’s press release on the issue, Tunney & Associates served as The Linn Group’s independent auditor, and conducted the company’s year-end audits for 2007 through 2011. The CFTC’s complaint alleges that neither Tunney & Associates, or Michael Tunney himself, had any experience auditing FCMs or any entity that holds customer segregated accounts. Moreover, the complaint alleges that neither was qualified to conduct an FCM audit, and that Michael Tunney had no understanding of the applicable Commodity Exchange Act, or CFTC regulatory provisions prior to accepting any of the audit engagements. The CFTC’s complaint states that Tunney & Associates, and Michael Tunney improperly relied on a non-employee, non-CPA, to perform all of the work on The Linn Group’s 2007-2011 audits. Michael Tunney also conducted The Lin Group’s 2011 audit on his own, despite the fact that he was not qualified to conduct an FCM audit.
Tunney & Associates face several other allegations, including how their audits did not comport with Generally Accepted Auditing Standards (GAAS) or CFTC Regulations. The CFTC’s press release outlines how there was no planning involved for the auditing of The Linn Group, as the audits failed to include appropriate tests of The Linn Group’s accounting system, internal accounting controls, and procedures for safeguarding customer firm assets.
A settlement between The Linn Group and the CFTC has been reached, in connection with the company’s failure to properly handle, monitor, and report customer funds it maintained as required by the Commodity Exchange Act and Regulations — and for supervision failures. As part of the settlement, The Linn Group has agreed to a $400,000 civil monetary penalty and retention of a consultant to review and improve The Linn Group’s procedures as necessary.