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Entergy Corp. settles SEC internal accounting controls violation for $12 million

investing.com 20/12/2024 - 13:57 PM

SEC Fines Entergy Corporation

Investing.com — The Securities and Exchange Commission (SEC) has announced that Louisiana-based utility company, Entergy Corporation (NYSE:ETR), has agreed to pay a $12 million civil penalty. This settlement arises from charges alleging the company failed to maintain adequate internal accounting controls, resulting in inaccuracies in its financial statements.

Details of the SEC Complaint

The SEC's complaint, filed in the U.S. District Court for the District of Columbia, states that from mid-2018 to the present, Entergy recorded materials and supplies at their average cost as an asset on its balance sheets. Reports indicate that company employees and management consultants have informed Entergy that this asset included a substantial amount of potential surplus. This surplus comprises aged materials and supplies that exceed Entergy’s anticipated future use or the maximum stocking levels required by its business units.

The complaint alleges Entergy failed to implement a comprehensive review process to identify and assess these materials and supplies for surplus. This process should have included remeasuring costs and recording any differences between the average cost and remeasured cost as an expense, as required by generally accepted accounting principles (GAAP).

SEC's Emphasis on Internal Controls

Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement, highlighted the significance of internal accounting controls for ensuring the accuracy and reliability of financial statements. He remarked that investors depend on public companies like Entergy to maintain adequate internal accounting controls.

Entergy's Response

Entergy, without admitting or denying the SEC's allegations, has consented to a final judgment pending court approval. This judgment includes a permanent injunction against violating sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, a payment of the $12 million civil penalty, and the adoption of recommended improvements from an independent consultant to strengthen its internal accounting controls.

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