The SEC has always focused on the conduct of auditors and other important fund gatekeepers. In some instances, it tests the conduct and adequacy of audits. In a recent administrative proceeding, the SEC accused an accounting and auditing firm and one of its partners of engaging in improper professional conduct in connection with their audits of two private funds. The respondents allegedly failed to comply with professional auditing standards in evaluating the funds’ valuations of certain investments in preferred stock. This article details the SEC’s allegations, the alleged audit deficiencies and the sanctions and undertakings imposed on the respondents, with commentary from John Hunt, partner at Sullivan & Worcester. See “SEC Enforcement Action Accuses Fund Auditor and Partners of Widespread Failures Valuing Level 3 Assets and Lack of Independence” (Sep. 9, 2021).