EY settles with the SEC

This week, the NY Times reported that the SEC reached a settlement with EY for its audits of Bally Total Fitness. The article reports that "Six current and former Ernst partners, including Randy G. Fletchall, the partner in charge of the firm’s national office, were ... sanctioned by the commission in one of its most sweeping actions against auditors involved in a failed audit." The SEC's $8.5 million settlement is reported as "one of the highest ever paid by an accounting firm.”
Here are a few quotes:

“It is deeply disconcerting that partners, even at the highest levels of E. & Y., failed to fulfill their basic obligations to the investing public by not conducting proper audits.”

“This case is a sharp reminder to outside auditors that they must carry out their duties with due diligence."

"Mr. Fletchall, who remains with Ernst, was in charge of resolving technical accounting issues in the United States ... was censured by the commission."
"A veteran S.E.C. official ... said he knew of no previous enforcement cases in which a partner of a major firm was cited for his actions as head of a national office."
"Ernst was reacting in 2002 to a growing number of accounting scandals, including Enron, and decided to get tough with clients who had previously been allowed to take aggressive accounting positions. The firm forced Bally to stop recording revenue in an improper manner that allowed it to claim earnings earlier than was allowed by accounting rule. But in doing that, the firm allowed Bally to not admit to having violated the rules in the past, an action that would have forced it to restate its accounts and admit that losses in previous years had been much larger."
"The case could provide support for reformers who have said companies should be forced to periodically change accounting firms, a change that Congress considered but rejected in passing the Sarbanes-Oxley law in 2002."