UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 90699 / December 17, 2020

ACCOUNTING AND AUDITING ENFORCEMENT

Release No. 4198 / December 17, 2020

ADMINISTRATIVE PROCEEDING

File No. 3-20173

In the Matter of

MANCERA, S.C.,

ALEJANDRO VALDEZ 

MENDOZA, C.P.,

and

ANGEL RADAMES 

CORRAL NIEBLAS, C.P.

Respondents.

ORDER INSTITUTING PUBLIC

ADMINISTRATIVE AND CEASEAND-DESIST PROCEEDINGS PURSUANT TO 

SECTIONS 4C AND 21C OF THE SECURITIES 

EXCHANGE ACT OF 1934 AND RULE 102(e) 

OF THE COMMISSION’S RULES OF 

PRACTICE, MAKING FINDINGS, AND 

IMPOSING REMEDIAL SANCTIONS AND A 

CEASE-AND-DESIST ORDER

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate that public 

administrative and cease-and-desist proceedings be, and hereby are, instituted against Mancera,

S.C. (“Mancera”), Alejandro Valdez Mendoza, C.P. (“Valdez”), and Angel Radames Corral 

Nieblas, C.P. (“Corral”) (collectively, “Respondents”), pursuant to Sections 4C1 and 21C of the 

 

1 Section 4C provides, in relevant part, that: 

The Commission may censure any person, or deny, temporarily or permanently, to any person the 

privilege of appearing or practicing before the Commission in any way, if that person is found . . . 

(1) not to possess the requisite qualifications to represent others; (2) to be lacking in character or 
2

Securities Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(ii) of the Commission’s 

Rules of Practice.2

II.

In anticipation of the institution of these proceedings, Respondents have submitted Offers

of Settlement (the “Offers”) which the Commission has determined to accept. Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings

herein, except as to the Commission’s jurisdiction over them and the subject matter of these 

proceedings, which are admitted, Respondents consent to the entry of this Order Instituting Public 

Administrative Proceedings Pursuant to Section 4C and 21C of the Securities Exchange Act of 

1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing 

Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. 

III.

On the basis of this Order and Respondent’s Offer, the Commission finds3that: 

A. SUMMARY

1. This matter involves violations of the federal securities laws and improper 

professional conduct by Mancera (the Mexican member firm of Ernst & Young Global), and two 

members of Mancera’s engagement team – then-partner Valdez, and then-senior manager Corral –

during Mancera’s audits of the 2010, 2011 and 2012 financial statements of Desarrolladora 

Homex, SAB de CV (“Homex”), a homebuilder headquartered in Sinaloa, Mexico. 

2. Throughout the period of these audits, Homex’s common stock was listed on the 

New York Stock Exchange. Also throughout all three fiscal years covered by these audits, Homex 

engaged in a multi-billion dollar financial fraud by overstating both its number of homes sold and 

its revenues, in the aggregate of 106,000 units, or 317%, and of $3.3 billion (MXN $44 billion), or 

355%, respectively.

 

integrity, or to have engaged in unethical or improper professional conduct; or (3) to have willfully 

violated, or willfully aided and abetted the violation of, any provision of the securities laws or the 

rules and regulations issued thereunder.

2 Rule 102(e)(1)(ii) provides, in pertinent part, that:

The Commission may . . . deny, temporarily or permanently, the privilege of appearing or 

practicing before it . . . to any person who is found . . . to have engaged in unethical or improper 

professional conduct.

3 The findings herein are made pursuant to Respondents’ Offers of Settlement and are not binding on any other 

person or entity in this or any other proceeding. 
3

3. In their Homex audits, Respondents failed to comply with Public Company 

Accounting Oversight Board (“PCAOB”) auditing standards. These lapses included failures (i) to 

exercise due professional care and skepticism, (ii) to adequately plan the audits, (iii) to adequately

train and supervise the engagement team, (iv) to prepare audit documentation in sufficient detail, 

(v) to obtain sufficient competent or appropriate audit evidence to support the audit opinions, and 

(vi) to properly evaluate audit results; and Mancera’s policies and procedures with respect to these 

failures failed to comply with PCAOB quality control standards.

B. RESPONDENTS

4. Mancera, S.C. (“Mancera”) is a Mexican civil company (sociedad civil or “S.C.”) 

and a PCAOB-registered public accounting firm with headquarters in Mexico City, Mexico. 

Mancera is a member firm of Ernst & Young Global. Mancera served as Homex’s independent 

auditor for at least the years ended 2010 to 2012. Mancera directed its services for Homex from its 

Culiacán, Sinaloa, office.

5. Alejandro Valdez Mendoza (“Valdez”), C.P., age 46, a Mexican national who 

currently resides in Culiacán, Sinaloa, Mexico, is a Contador Público, the Mexican equivalent of a 

certified public accountant (“CPA”). Valdez was the Mancera engagement partner on, and had 

final audit responsibility over, the 2010 to 2012 year-end audits of Homex.

6. Angel Radames Corral Nieblas (“Corral”), C.P., age 46, a Mexican national 

who currently resides in Mexico City, Mexico, is a Contador Público. Corral was the Mancera

senior manager on the Homex audits for the years ended 2010 to 2012. He was responsible for 

supervising the audit managers and the significant audit areas, including the audit areas that are the 

subject of this Order. In approximately July 2015, Corral was promoted to his current position as a 

partner at Mancera.

C. OTHER RELEVANT ENTITIES

7. Desarrolladora Homex, S.A.B. de C.V. (“Homex”), CIK 1293153, a foreign 

private issuer, is a Mexican corporation founded in 1989 in Culiacán, Sinaloa, Mexico, which is its 

principal place of business. At all relevant times, Homex has been engaged in the development, 

construction and sale of affordable and middle-income housing in Mexico. From its initial public 

offering (“IPO”) on June 29, 2004 through May 2014, Homex’s common stock was registered 

pursuant to Section 12(b) of the Exchange Act, and its securities were dually listed on the Mexican 

Stock Exchange and the New York Stock Exchange (“NYSE”), with the NYSE-listed securities 

being in the form of sponsored American Depository Shares (“ADSs”). On May 2, 2014 (in the 

wake of its April 30, 2014 filing for Mexico’s equivalent to bankruptcy reorganization), Homex’s 

stock was suspended from trading on (and, soon thereafter, delisted from) the NYSE. Thereafter, it 

was quoted on the OTC Link operated by OTC Markets Group. On December 9, 2016, the U.S. 

based facility for Homex’s ADSs was terminated. On March 3, 2017, the Commission: (i) filed a 

civil action in federal court against Homex, with Homex consenting to the entry of a final 

judgment that included injunctive relief and an agreement to be prohibited from offering securities 
4

in the U.S. markets for at least five years, and (ii) simultaneously issued an Order of Suspension of 

Trading suspending trading in Homex stock.

D. MANCERA’S AUDITS OF HOMEX

1. The Fraud at Homex

8. Homex engaged in a massive fraudulent accounting scheme over at least a three 

year period. In particular, the Company inflated its number of homes sold during the years 2010 to 

2012 by 106,000 units, or 317%, and overstated its revenues by USD $3.3 billion (MXN $44 

billion), or 355%. Homex’s fraud consisted of, among other things, (i) manually entering both 

false revenue and corresponding false cost-of-sales and inventory information; and (ii) entering

into and falsely accounting for with-recourse factoring agreements with at least 13 Mexican banks, 

which Homex was able to repay only by additional bank borrowing, in check-kiting fashion. The 

chart below illustrates the materiality of the fraud to Homex’s financial statements:

2. Mancera’s Deficient Homex Audits

Background

9. Homex was the largest client for Mancera’s Sinaloa office and, at the time of 

Mancera’s 2010-2012 audits, purported to be the largest homebuilder in Mexico.

10. The Respondents were aware, during Mancera’s 2010 to 2012 audits, (i) that 

Homex claimed to have between 150 and 250 projects under construction across Mexico; (ii) that 

these projects’ sizes greatly varied, with each project ranging from 100 to 2,500 housing units, i.e., 

either single-family homes or multi-unit buildings; (iii) that multiple projects could be further 

organized into larger housing developments (e.g., during the 2011 audit, the Chulavista housing 

development in Cabo San Lucas was comprised of six projects (#820, #849, and #919-#922) for a 

total of 6,391 planned housing units); and (iv) that typically, it took years for all of the homes in a 

project to be built and sold. The Respondents also knew that, in order to track the construction and 

sale of homes, Homex utilized an internal data system called the “Sistema Integral de 

OVERSTATED REVENUES AND UNITS SOLD, FISCAL YEARS 2010-2012

(Revenue Figures in Millions of MXN $)

FY 2010 FY 2011 FY 2012 TOTAL 2010-

2012

Revenue Unit 

Sales Revenue Unit Sales Revenue Unit Sales Revenue Unit Sales

As Reported on 

Form 20-F

$18,465 44,347 $20,210 52,486 $18,809 42,945 $57,484 139,778

Actual Results $6,456 16,977 $3,981 11,006 $2,200 5,536 $12,637 33,519

Revenue/Units 

Overstated $12,009 27,370 $16,229 41,480 $16,609 37,409 $44,847 106,259

% Overstatement 186% 161% 408% 377% 755% 676% 355% 317%
5

Administración” (the “SIA” system), which identified each individual home by project, block, and 

lot number. 

11. At the time of the 2010-2012 audits, the Respondents were likewise aware of the 

following: prior to construction, Homex prepared for each housing development a financial budget 

and development blueprint. These documents included various data and images reflecting the 

geographical location of the development, layout of all homes and projects within the 

development, and the total number of units to be built. As construction progressed, Homex 

maintained for each project a “sembrado de viviendas” report (“Sembrado Report”). Each 

Sembrado Report listed housing units by their block and lot numbers, the housing unit’s 

construction percentage, and in many instances its status as either “operada” or “no operada”.

4

Awareness of Fraud Risks

12. In planning the 2010-2012 Homex audits, the Mancera engagement team, including 

Valdez and Corral, identified fraud as a potential source of risk of material misstatement over three 

financial statement accounts: titled-home revenues,5 accounts receivables on homes sold, and 

construction-in-process. In addition, during the planning stages of the 2012 Homex audit, and as 

early as August 2012, the Mancera engagement team, including Valdez and Corral, became aware 

that Homex was under SEC investigation. The foregoing, and other known factors including 

Homex’s overall liquidity and financial position that led to its bankruptcy the following year, led 

Mancera to re-evaluate and increase its rating of risk for Homex as an audit client from moderate 

to “close monitoring” (i.e., a category of audit client subject to a significant audit risk that required 

review of work papers by senior engagement team members and heightened due care and 

scrutiny). Despite the “close monitoring” risk designation in place during the 2012 audit, 

Respondents did not obtain sufficient appropriate audit evidence to support Mancera’s audit 

opinion.

The Respondents’ Improper Professional Conduct

13. The Respondents failed to meet professional standards and violated and/or caused

violations of securities laws in a number of respects throughout the Homex 2010 to 2012 audits. As 

detailed below, these audits were flawed in their planning, supervision and execution. As an initial 

matter, the Mancera engagement team’s audit approach failed to take into account the nature of

Homex’s operations and the planned audit procedures did not adequately address the identified 

fraud risks. For example, the planned audit procedures over revenues and construction-in-process 

balances were designed in isolation, without calling for corroborating information across work 

papers for consistency and accuracy. As discussed below, the Respondents each engaged in 

improper professional conduct by failing in one or more aspects of the Homex audits to: (i) 

 

4 Although the literal meaning of operada is “operational,” the term had a more specialized meaning (with which 

Respondents were familiar at all relevant times) when used in documents and communications covered by Homex’s 

accounting policies, i.e., that revenue had been recognized by Homex, and that the pre-requisitesfor such 

recognition had been met (which, in the case of home sales, meant that, inter alia, the home had been at least 95% 

constructed).

5

“Titled-home revenues” are revenues derived from the construction of homes on Homex-owned land, representing 

the substantial majority of Homex’s revenues.
6

exercise due professional care and skepticism; (ii) adequately plan the audits; (iii) adequately train 

and supervise the engagement team; (iv) prepare audit documentation in sufficient detail; (v) 

obtain sufficient competent or appropriate audit evidence to support the audit opinions; and (vi) 

properly evaluate audit results. 

Failures Relating to Construction-in-Process (“CIP”) for Years 2010 - 2012

14. For each of the 2010-2012 audits, CIP was a material component of Homex’s 

balance sheet, representing between 41% and 46% of Homex’s total assets. 

15. The Mancera engagement team documented in its Fraud Considerations Forms (EY 

Form U104) that CIP had a risk of material misstatement due to fraud for “the improper 

capitalization of expenses.” The CIP balance was comprised of construction costs (i.e. land, labor, 

direct materials, and relevant indirect costs) incurred in housing development. Per the company’s

policy, CIP for each house remained on Homex’s balance sheet until the house was built and sold. 

One of the Mancera engagement team’s procedures to audit CIP was to conduct site visits. As 

explained below, this audit step was not appropriately designed and executed, and, as a result, 

failed to generate sufficient competent or appropriate audit evidence over the CIP balance.

a. Failure to Adequately Audit Homex’s Housing Developments

16. According to site visit instructions, Mancera visited selected projects to confirm the 

existence of houses under construction and to compare the progress of work at the project against 

the CIP recorded on the books. As a result of inadequate training, supervision and review, as well 

as failure by Mancera’s audit team members to follow internal written site visit instructions, these 

visits did not yield sufficient competent or appropriate audit evidence to support Homex’s CIP 

year-end balances.

1. Inadequate Site Visit Training and Supervision

17. Valdez and Corral failed to adequately train and supervise audit team members in 

the performance of site visits. The engagement team conducting the site visits, some of whom 

were drawn from other Mancera offices due to personnel limitations, attended an optional training 

session that lasted approximately one hour. While this training covered basic matters such as a 

review of standard written site visit instructions – which an engagement team manager who took 

the training viewed as suggestions rather than requirements – it failed to address important topics

including fraud risks associated with Homex’s home construction. Furthermore, these engagement 

team members were not provided with, for example, any other context for their site visit, including 

reported construction progress at the site to be visited, the number of home sales, or the site’s 

location. 

18. This lack of training and supervision resulted in a failure by engagement team 

members in several cases to locate correctly the sites selected by Mancera for review. In order to 

locate the sites to be visited, the engagement team members relied on directions provided by 

Homex and site maps provided on arrival by Homex project managers. The engagement team 
7

members never independently verified that the directions to the selected sites or the site maps 

thereof provided by Homex were accurate.6 As a result, in at least 29 of the 84 site visits 

conducted during the 2010 to 2012 Homex audits, engagement team members visited either the 

wrong project within the correct housing development, or the wrong housing development entirely. 

19. Corral and Valdez failed to supervise properly the site visit process and to 

appropriately review the site visit work papers prepared by other members of the engagement 

team. There is no indication in the site visit work papers that Valdez reviewed them or asked any 

questions. For his part, Corral did review and sign off on the cover page of certain site visit work 

paper packets, but did not review any of the detailed work papers therein. Instead, Corral’s review 

consisted of asking a manager: (i) who performed a detail review of the work papers; (ii) general 

questions about the procedures performed; (iii) if the manager had noted or observed something; 

and (iv) whether supporting documentation was complete.

20. As detailed immediately below, the failure to properly train and supervise 

engagement team members performing site visits resulted in repeated instances of engagement 

team members (i) not following instructions, and (ii) not identifying inconsistencies in project 

documents provided by Homex.

2. Engagement Team Members Did Not Follow Written Site Visit 

Instructions

21. An engagement team member brought to the site visit a copy of the site visit 

instructions. Those site visit instructions required that the engagement team member, among other 

things (i) interview the Homex project site manager to determine the percentage completion of the 

project, (ii) collect specific documents from the visited site, including a Sembrado Report, and 

from Homex headquarters for inclusion in the audit work papers, and (iii) use the collected 

documents to assist in a physical inspection of each section of the site, to be summarized and 

supported by photographs in a site visit memorandum. 

22. Engagement team members that performed the site visits failed both to obtain 

documents and to use the documents obtained as set forth in the site visit instructions. As a result, 

engagement team members did not have an adequate understanding of the projects that they visited 

and, in several instances, failed to visit the correct project site. For example, instead of obtaining

detailed development blueprints for the project to be visited from Homex’s corporate office, as 

required by the site visit instructions, prior to visiting a project site in order to gain an 

understanding of that development’s location and layout, the engagement team relied on site maps

obtained from Homex’s on-site project managers. Several of these site maps were incorrectly 

labeled. As a result, engagement team members visited the incorrect project during at least 29 of 

the approximately 84 site visits conducted in connection with the 2010 to 2012 Homex audits. The 

audit evidence obtained for these 29 site visits therefore could not reasonably support the 

conclusions reached by the engagement team, which in each instance was that the physical 

inspection of the project site corroborated the CIP recorded by Homex.

 

6 For example, the engagement team did not use publicly available mapping resources such as Google Maps, which 

was used by engagement team members in planning site visits to test land acquired for future housing developments.
8

23. The engagement team also failed to conduct a physical inspection of each section of 

the visited project, as set forth in the site visit instructions. Rather, the standard practice, as 

reflected in site visit work papers, was for the engagement team member to identify and 

specifically document the construction progress of only two to three housing units. The 

engagement team members did not document their rationale or support for selecting the visited 

homes. The audit sampling and testing approach – i.e., using at most three homes to provide 

evidential audit matter for a Homex project potentially comprised of thousands of homes – did not 

provide sufficient competent or appropriate audit evidence to support the engagement team 

members’ conclusion that the physical inspection of these homes corroborated the CIP balance. 

Audit Failures Relating to Home Revenues for Years 2010-2012

24. For each of the 2010 to 2012 audits, the engagement team identified in its Fraud 

Considerations Forms titled-home revenues and accounts receivables on home sales as being 

subject to a risk of material misstatement due to fraud. Specifically, the Mancera engagement team 

identified the risk that revenues (and related accounts receivable) “might be recognized for services 

not yet provided.” Although the Mancera engagement team performed audit procedures relating to 

revenue recognition, the team failed (i) to address the aforementioned risk, (ii) to obtain sufficient 

competent or appropriate audit evidence regarding titled-home revenues, and (iii) to properly 

analyze documents that it did obtain which raised red flags about potential revenue recognition 

issues. 

a. Notary Confirmations for the 2010 and 2011 audits

25. Multiple failures pertained to Mancera’s procedures for confirming home sales 

through the use of confirmations from notaries public. During the 2010 and 2011 audits,

7 Mancera 

sent confirmations to notaries public for those homes identified by Homex as “operada sin 

entregada” (i.e., sold-but-not-delivered). This designation meant that, according to Homex, each 

home so designated had been substantially (at least 95%) constructed, received a certificate of 

habitability, gone to closing, and its title had passed – and hence Homex had recognized revenue 

from its sale – but, nonetheless, the home’s purchaser had not taken possession of the home. The 

confirmation replies were on the notaries’ letterhead and confirmed only the name of the individual 

who purportedly purchased the home and either the date of closing or merely that the closing 

occurred sometime during the audit period. These confirmation replies did not confirm the specific 

locations (project, block and lot number) of the housing units purportedly purchased, the closing 

dates (for those homes in which the notary merely said the close happened during the audit year), 

nor the purchase prices, even though all of the foregoing information was purportedly requested by 

the engagement team’s confirmations and appeared in the title document signed at closing. The 

work papers do not identify any instance in which the engagement team followed-up with a notary 

to obtain and verify the accuracy of this omitted information, or performed alternative procedures. 

 

7 This procedure was performed to test revenue and to obtain reasonable assurance as to the accuracy of a footnote 

disclosure in Homex’s financial statements that reconciled application of Mexican and U.S. GAAP. Mancera did

not send confirmations to notaries public for the 2012 audit because Homex had adopted IFRS and thus no longer 

included in its financial statements any reconciliation of Mexican and U.S. GAAP.
9

Furthermore, the engagement team did not retain in the work papers for the 2010 and 2011 audits 

any copies of the confirmation requests sent to the notaries. The work papers instead contained a 

confirmation log and the confirmations received from the notaries. Ultimately, the engagement 

team did not obtain sufficient competent or appropriate evidence through the confirmation process 

to confirm specific location of homes designated as sold-but-not-delivered (“operada sin 

entregada”). 

26. In addition, because the confirmations from the notaries public confirmed only the 

name of the buyer and the year of the sale, and the engagement team did not perform alternative 

procedures related to the omitted information, Mancera’s notary-confirmations procedure failed to 

detect situations in which Homex supplied the wrong project, block and lot number for home sales 

it had genuinely made, because Homex had already used those coordinates in prior periods for 

fictitious sales that it had recorded while the home sites in question had no homes built on them. 

During the course of Homex’s fraud, such sales occurred often. For example, a certain purchaser 

(“Purchaser A”) genuinely did buy from Homex a home having a certain project, block and lot 

number (“Location X”) on a certain date in December 2011; but because Homex had previously

fraudulently recognized revenue from a fictitious sale of an as-yet-unbuilt home at Location X, 

Homex falsely recorded the location of the home it sold to Purchaser A as a different home site, on 

which, in fact, no home had yet been built. Homex designated this sale as “operada sin 

entregada”; Mancera performed its notary confirmation procedure; the notary confirmed that 

Purchaser A had indeed purchased a home in 2011; the Mancera engagement team did not perform 

alternative procedures and was, without sufficient cause, satisfied.

b. Failure to Perform Procedures to Resolve Inconsistencies Regarding the 

“Casas Operadas” Issue

27. During the 2012 audit, the Respondents learned, no later than February 2013, that 

several Homex Sembrado Reports obtained during engagement team site visits marked hundreds of

homes as being both “operada” (see n.4 above) and less than 95% constructed. Mancera 

performed a frequency analysis containing all data across all Sembrado Reports collected during 

the 2012 audit site visits showing that the bulk of these homes (“casas operadas”) were identified 

as under 16% completed. Of the 630 homes identified in the analysis, 576, or 91.4%, came from a 

single project, Chulavista (Project #921).

28. During its 2012 audit, Mancera included, in an open audit issues email from Corral 

to Homex management, the inconsistency in Sembrado Reports discovered during the engagement 

team’s site inspections that simultaneously recorded homes as “operada” and significantly less than 

95% constructed. Despite this, the engagement team failed to document in its work papers: (1) 

this inconsistency presenting a potential improper revenue recognition issue, (2) the 

communications it had with Homex management; (3) whether any audit procedures were 

specifically undertaken to analyze the issue; or (4) how the issue was resolved. In response to this 

open audit issue, Homex management represented to Valdez that management had investigated the 

issue and that there was nothing for the engagement team members to act on; that the Sembrado 

Reports were incorrect, and that revenue had not been recognized on any unbuilt units marked as 

“operada.” Relying upon these representations, Valdez deemed the issue resolved. Although 
10

Respondents performed other revenue recognition procedures unrelated to the Sembrado Reports, 

they did not obtain sufficient appropriate audit evidence, including proper evaluation of 

inconsistent information identified and verification of management’s representations to address the 

inconsistency presenting a potential improper revenue recognition issue, referenced above.

29. If the Respondents had sufficiently evaluated the completeness and accuracy of the 

Sembrado Reports, including through examination of the relevant documents in their possession, 

they might have identified additional inconsistencies related to Homex’s fraud. For example, 

comparing the project, block and lot numbers of the homes identified in the frequency analysis 

referenced in ¶ 27 above to the revenue schedules in their work papers would have reflected that 

revenue was recognized on 21 of those homes, with revenue on 13 of them being recognized in 

2012, and on 8 more in earlier years. None of those 21 homes, however, was located in Project 

#921, which, as noted in ¶ 27 above, alone accounted for 91.4% of the homes identified in the 

frequency analysis. Had Respondents examined relevant documents in their possession regarding 

Project #921, they would have learned that, according to Mancera’s 2011 revenue work papers, 

94% (or 1,491) of the 1,592 budgeted homes for Project #921 were reported as sold in 2011. Yet, 

as noted above, almost 600 homes were still marked in the 2012 Sembrado Report for Project #921

as being under 95% complete, and therefore could not have been sold. Further, none of the block 

and lot numbers for any of the homes reported as sold in 2011 agreed to the block and lot numbers 

in the 2012 Sembrado Report for Project #921. 

2. Failure to Properly Evaluate the Responses to the Bank A Confirmations for the 

2010 and 2012 Audits

30. Each year, the engagement team confirmed the cash balances in Homex’s bank 

accounts. These included cash balances at one particular Mexican bank (“Bank A”). During the 

2010 and 2012 audits, Mancera sent standard Ernst & Young bank confirmations to Bank A for all 

the accounts held by Homex (including Homex affiliates such as the construction and sales 

subsidiaries known by their acronyms “PICSA” and “BCEN”). As part of that confirmation 

process, Mancera also asked Bank A about any financial arrangements, including trust agreements

and debts, involving Homex. With respect to five Homex bank accounts – three in 2010 and two 

in 2012 – that each had year-end cash balances in excess of MXN $998 million (approximately 

USD $80.6 and USD $76.8 million in 2010 and 2012, respectively), Bank A responded to 

Mancera’s request by sending its own form showing that Bank A held these accounts in trust for 

Homex subsidiaries PICSA or BCEN. Furthermore, Bank A’s responses to Mancera showed that 

the three signatories to each of the aforementioned bank accounts were not Homex, PICSA or 

BCEN officers, like other confirmation replies showed, but rather Bank A employees, indicating 

that Homex did not have control of these accounts. In the section of Bank A’s response to 

Mancera related to information about debt accounts, Bank A responded, “none.”

31. Despite being told that the accounts’ holders were Bank A trusts and that none of 

the accounts’ signatories were identified as Homex employees, Mancera engagement team 

members did not follow up to learn more details about the trust arrangements. The engagement 

team members did not inquire into the nature of these bank accounts, to determine whether there 

were any associated agreements, and, if so, to obtain a copy of the terms of those agreements. 
11

They also failed to follow up on the signatories who potentially had authorization on Homex 

accounts each amounting to nearly MXN $1 billion but who were not Homex employees. 

32. In fact, the trust agreements corresponding to each of the accounts in the Bank A 

confirms referenced in ¶ 30 above pertained to “with-recourse” factoring agreements that, as 

described at ¶ 8 above, were a key component of Homex’s fraud. Homex improperly recorded the 

amounts received under these agreements: rather than recording these with-recourse factored 

amounts as loans, collateralized by the related accounts receivable, Homex recorded the amounts

as collections of accounts receivable. Many of the factored accounts receivable balances in the 

agreement were fictitious since they pertained to fraudulent sales on unbuilt homes. The 

Respondents therefore failed to obtain sufficient competent or appropriate audit evidence from the 

bank confirmation audit procedure, which might have led them to detect the undisclosed factoring 

arrangements.

3. Failure to Properly Test and Document the Review of Journal Entries for the 

2010 Audit.

33. During its 2010 audit, the engagement team performed a test of journal entries in 

certain Homex entities to identify material misstatements due to fraud. For Homex’s PICSA 

entity, the engagement team selected 26 journal entries, including a MXN $998,045,000 journal 

entry to a Bank A bank account (“Account A”) dated December 27, 2010 with a description of 

“different movements of the day.” The journal entry recorded was eight lines of MXN

$998,045,000 being moved in and out of five Bank A bank accounts, including Account A, and 

pertained to cash from one of Homex’s with-recourse factoring agreements. While the work 

papers indicated that the engagement team reviewed support for the entry, the supporting 

documentation is not in the work papers nor is there a description of the evidence the engagement 

team member reviewed. In fact, for 19 of the 26 journal entries tested, the work papers lacked

either any purportedly reviewed documentation, or any detailed explanation concerning the same. 

Furthermore, for five of the 26 journal entries, the work papers term supporting documentation as 

“not applicable” without explanation; and the remaining two entries do not appear to have been 

tested because none of the audit steps are checked off. There is no persuasive evidence that the 

engagement team performed the procedures or obtained sufficient competent evidential matter. 

E. VIOLATIONS

RULE 102(e) AND SECTION 4C OF THE EXCHANGE ACT

34. Mancera’s 2010, 2011, and 2012 audits of Homex were deficient and not performed 

in accordance with PCAOB standards.8 Section 4C(b)(2) and Rule 102(e)(1)(iv) define improper 

professional conduct to include two types of negligent conduct: (1) a single instance of highly 

unreasonable conduct that results in a violation of professional standards in circumstances in which 

 

8 References to auditing standards in this Order are to PCAOB standards in effect at the time the audit work was 

performed. For example, the PCAOB risk assessment standards (AS 8-15) became effective for audits of fiscal 

years beginning on or after December 15, 2010 (i.e., the 2011 audit of Homex) and superseded AU § 311, among 

others. 
12

an accountant knows, or should know, that heightened scrutiny is warranted; or (2) repeated 

instances of unreasonable conduct, each resulting in violations of professional standards, that

indicate a lack of competence. 

35. Section 4C(a)(2) of the Exchange Act and CRP Rule 102(e)(1)(ii) provide, in part, 

that the Commission may censure or deny, temporarily or permanently, the privilege of appearing 

or practicing before the Commission to any person who is found by the Commission to have 

engaged in improper professional conduct. 

36. As set forth in more detail below, Respondents engaged in repeated violations of 

PCAOB standards including in areas that, for reasons stated in, e.g., ¶¶ 12 and 14 above, warranted

heightened scrutiny. As such, Respondents’ conduct constituted “improper professional conduct” 

within the meaning of Exchange Act Section 4C(a)(2) and CRP Rule 102(e)(1)(ii).

Respondentsfailed to demonstrate due professional care and professional skepticism during the 

2010 to 2012 Homex audits (AU §§ 230, 316, and 330 and AS 13)

37. AU § 230, Due Professional Care in the Performance of Work,requires that “due 

professional care ... be exercised in the planning and performance of the audit and the preparation 

of the report” (¶ .01). Due professional care requires the auditor to exercise professional 

skepticism, which is “an attitude that includes a questioning mind and critical assessment of audit 

evidence” (¶ .07). AU § 230 further requires that “in exercising professional skepticism, the 

auditor should not be satisfied with less than persuasive evidence because of a belief that 

management is honest” (¶ 9). Separately, AU § 316, Consideration of fraud in a Financial 

Statement Audit,requires that “because of the characteristics of fraud, the auditor’s exercise of 

professional skepticism is important when considering the fraud risks.9 The auditor should conduct 

the engagement with the mindset that recognizes the possibility that a material misstatement due to 

fraud could be present, regardless of any past experience with the entity and regardless of the 

auditor’s belief about management’s honesty and integrity. Furthermore, professional skepticism 

requires an ongoing questioning of whether the information and evidence obtained suggests that a 

material misstatement due to fraud has occurred” (¶ .13). Finally, AU § 330, The Confirmation 

Process, provides that “the auditor should exercise an appropriate level of professional skepticism 

throughout the confirmation process” and professional skepticism is important in, among other 

things, “evaluating the results of the confirmation procedures” (¶ .15).

38. In addition, AS 13, The Auditor’s Response to the Risks of Material Misstatement, 

also applies to the 2011 and 2012 audits and provides that once an auditor has assessed risks of a 

material misstatement, particularly fraud risks, they must exercise professional skepticism in 

gathering and evaluating audit evidence, including “obtaining sufficient appropriate evidence to 

corroborate management explanations or representations concerning important matters” (¶ .07).

 

9 This reference to AU § 316 incorporated an amendment as part of the PCAOB risk assessment standards and is 

applicable to the 2011 and 2012 Homex audits. For the 2010 Homex audit, AU § 316 ¶ .13 is identical other than 

replacing “the fraud risks” with “the risk of material misstatement due to fraud”.
13

39. As a result of Respondents’ conduct described above, each failed to exercise due 

professional care and professional skepticism in Mancera’s 2010, 2011 and 2012 audits of Homex.

Respondentsfailed to adequately plan the 2010 to 2012 Homex audits (AU §§ 311 and 316, AS 9 

and 12)

40. AU §311, Planning and Supervision, applies to the 2010 Homex audit and requires 

that “planning and supervision continue[] throughout the audit” (¶ .01) and that “the auditor should 

obtain a level of knowledge of the entity’s business that will enable him” to “obtain an 

understanding of the events, transactions and practices” that may have a “significant effect on the 

financial statements” (¶ .06). Knowledge of the entity’s business helps the auditor in “identifying 

areas that may need special consideration” (¶ .06a). In addition, AU § 316, Consideration of 

Fraud in a Financial Statement Audit, which applies to the 2010 through 2012 audits, states that 

“the auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about 

whether the financial statements are free of material misstatement, whether caused by error or 

fraud” (¶ .01).

41. AS 9, Audit Planning, applies to the 2011 and 2012 Homex audits and requires that 

“when developing the audit strategy and audit plan” the auditor should evaluate whether certain 

matters are “important to the company’s financial statements and internal control over financial 

reporting,” including “matters relating to the company’s business,” including its “operating 

characteristics”, and the “relative complexity of the company’s operations” (¶ 7). In addition, AS 

12, Identifying and Assessing Risks of Material Misstatement, requires that “the auditor should 

obtain an understanding of the company and its environment...to understand the events, 

conditions, and company activities that might reasonably be expected to have a significant effect 

on the risks of material misstatement” (¶ 7). AS 12 further requires that “obtaining an 

understanding of the nature of the company includes understanding... the company’s operating 

characteristics, including its size and complexity” (¶ 10).

42. As a result of Respondents’ conduct described above, each failed to properly plan 

Mancera’s 2010, 2011 and 2012 audits of Homex.

Respondents failed to adequately supervise and train the engagement team during the 2010 to 

2012 audits (AU § 311 and AS 10)

43. AU § 311, Planning and Supervision, which applies to the 2010 Homex audit,

states that “planning and supervision continues throughout the audit” (¶ .01) and that “supervision 

involves directing the efforts of assistants who are involved in accomplishing the objectives of the 

audit and determining whether those objectives were accomplished.” Among other things, 

“elements of supervision include instructing assistants” and “reviewing the work performed” (¶ 

.11). Finally, AU § 311 states that “the work performed by each assistant should be reviewed to 

determine whether it was adequately performed and to evaluate whether the results are consistent 

with the conclusions to be presented in the auditor’s report” (¶ .13).
14

44. AS 10, Supervision of the Audit Engagement, which applies to the 2011 and 2012 

Homex audits, states, “the engagement partner is responsible for the proper supervision of the work 

of engagement team members and for compliance with PCAOB standards” (¶ 3). In addition, ”the 

engagement partner may seek assistance from appropriate team members in fulfilling his or her 

responsibilities pursuant to this standard” and these team members “should comply with the 

requirements of this standard with respect to supervisory responsibilities assigned to them” (¶ 4). 

Those performing supervisory activities should “review the work of engagement team members to 

evaluate whether: (1) the work was performed and documented; (2) objectives of the procedures 

were achieved; and (3) the results of the work support the conclusion reached” (¶ 5.c). Finally, ”to 

determine the extent of supervision necessary for engagement team members to perform their work 

as directed and form appropriate conclusions, the engagement partner and other engagement team 

members performing supervisory activities should take into account: (a) the nature of the company, 

including its size and complexity; (b) the nature of the assigned work for each engagement team 

member; (c) the risks of material misstatement; and (d) the knowledge, skill and ability of each 

engagement team member” (¶ 6).

45. As a result of Respondents’ conduct described above, each failed to properly 

supervise and train the engagement team for the 2010, 2011 and 2012 Homex audits. 

Respondents did not prepare required documentation during the 2010 to 2012 audits (AS 3)

46. AS 3, Audit Documentation, requires that “audit documentation must contain 

sufficient information to enable an experienced auditor, having no previous connection to the 

engagement: (1) to understand the nature, timing, extent, and results of procedures performed, 

evidence obtained, and conclusions reached, and (2) to determine who performed the work and the 

date such work was completed as well as who reviewed the work and the date of such review” (¶ 

6). It also states that “the auditor must identify all significant findings or issues in an engagement 

completion document” (¶ 13). Lastly, “documentation of auditing procedures related to the 

inspection of significant contracts or agreements should include abstracts or copies of the 

documents” (¶ 10).

47. As a result of Respondents’ conduct described above, each failed to prepare 

required audit documentation on Mancera’s 2010, 2011 and 2012 Homex audits. 

Respondentsfailed to obtain sufficient competent or appropriate audit evidence to support the 

audit opinions for the 2010 to 2012 audits (AU § 326 and AS 15)

48. AU § 326, Evidential Matter, applies to the 2010 audit and requires that auditors

obtain sufficient competent evidential matter “through inspection, observation, inquiries and 

confirmations to afford a reasonable basis for an opinion regarding the financial statements under 

audit” (¶ .01). In addition, “to be competent, evidence, regardless of its form, must be both valid 

and relevant” (¶ .21). 

49. AS 15, Audit Evidence, applies to the 2011 and 2012 audits and states that “audit 

evidence is all the information, whether obtained from audit procedures or other sources that is 
15

used by the auditor in arriving at the conclusions on which the auditor’s opinion is based. Audit 

evidence consists of both information that supports and corroborates management’s assertions 

regarding the financial statements or internal control over financial reporting and information that 

contradicts such assertions” (¶ 2). “To be appropriate, audit evidence must be both relevant and 

reliable in providing support for the conclusions on which the auditor’s opinion is based” (¶ 6). 

“When using information produced by the company as audit evidence, the auditor should evaluate 

whether the information is sufficient and appropriate for purposes of the audit by performing 

procedures to test the accuracy and completeness of the information, or test the controls over the 

accuracy and completeness of that information” (¶ 10). “If audit evidence obtained from one 

source is inconsistent with that obtained from another, or if the auditor has doubts about the 

reliability of information to be used as audit evidence, the auditor should perform the audit 

procedures necessary to resolve the matter and should determine the effect, if any, on other aspects 

of the audit” (¶ 29). 

50. As a result of Respondents’ conduct describe above, each failed to obtain sufficient 

competent/appropriate audit evidence to support Mancera’s audit opinions for the 2010, 2011, and 

2012 Homex audits. 

Respondentsfailed to properly evaluate audit results (AU § 316 and AS 14)

51. AU § 316, Consideration of Fraud in a Financial Statement Audit, as it applies to 

the 2010 audit, requires that “the auditor's response to the assessment of the risks of material 

misstatement due to fraud involves the application of professional skepticism in gathering and 

evaluating audit evidence” (¶ .46). In addition, “[a]t or near the completion of fieldwork, the 

auditor should evaluate whether the accumulated results of auditing procedures and other 

observations... Such an evaluation may provide further insight about the risks of material 

misstatement due to fraud and whether there is a need to perform additional or different audit 

procedures.” (¶ .74).

52. AS 14, Evaluating Audit Results, which applies to the 2011 and 2012 audits, 

requires that in the audit of financial statements, the auditor’s evaluation of audit results should 

include evaluation of the “conditions identified during the audit that relate to the assessment of the 

risk of material misstatement due to fraud” (¶ 4.d.) and “the sufficiency and appropriateness of the 

audit evidence obtained” (¶ 4.f.). “The auditor should obtain corroboration for management’s 

explanations regarding significant unusual or unexpected transactions, events, amounts, or 

relationships” (¶ 8). Finally, “factors that are relevant to the conclusion on whether sufficient 

appropriate audit evidence has been obtained” include, among others, “the results of audit 

procedures performed in the audit of financial statements, including whether the evidence obtained 

supports or contradicts management’s assertions” and “whether such audit procedures identified 

specific instances of fraud” (¶ 34.b).

53. As a result of Respondents’ conduct described above, each failed to properly 

evaluate audit results for the 2010, 2011 and 2012 Homex audits. 
16

Mancera’s applicable policies and procedures were deficient (QC 20, QC 30 and QC 40)

54. PCAOB Quality Control Section 20, System of Quality Control for a CPA Firm’s 

Accounting and Auditing Practice, (“QC Section 20”) states that, “[p]olicies and procedures should 

be established to provide the firm with reasonable assurance that the work performed by 

engagement personnel meets applicable professional standards, regulatory requirements, and the 

firm’s standards of quality” (¶ 17). QC Section 20 also states that a firm should communicate 

these policies and procedures to its personnel in a manner that provides reasonable assurance that 

these policies and procedures are understood and complied with (¶ 23). In addition, PCAOB 

Quality Control Section 30, Monitoring a CPA Firm’s Accounting and Auditing Practice, (“QC 

Section 30”) states, “[m]onitoring procedures taken as a whole should enable the firm to obtain 

reasonable assurance that its system of quality control is effective” (¶ 3). Finally, PCAOB Quality 

Control Section 40, The Personnel Management Element of a Firm’s System of Quality ControlCompetencies Required by a Practitioner-in-Charge of an Attest Engagement, (“QC Section 40”) 

states that a firm’s policies and procedures should be designed to provide a firm with reasonable 

assurance that “work is assigned to personnel having the degree of technical training and 

proficiency required in the circumstances” (¶ 2) and “such individuals possess the kinds of 

competencies that are appropriate given the circumstances of individual client engagements” (¶ 3).

55. As a result of Mancera’s conduct described above, Mancera’s policies and 

procedures with respect to (i) exercising due professional care and skepticism; (ii) adequately 

planning the audits; (iii) adequately training and supervising the engagement team; (iv) preparing

audit documentation in sufficient detail; (v) obtaining sufficient competent or appropriate audit 

evidence to support the audit opinions; and (vi) properly evaluating audit results, failed to comply 

with QC Sections 20, 30 and 40.

SECTION 10A(a)(1) OF THE EXCHANGE ACT

56. Section 10A(a)(1) of the Exchange Act requires that the audit of the financial 

statements of an issuer include “procedures designed to provide reasonable assurance of detecting 

illegal acts that would have a direct and material effect on the determination of financial statement 

amounts.” No showing of scienter is necessary to establish a violation of Section 10A. See SEC v. 

Solucorp Indus., Ltd., 197 F. Supp. 2d 4, 10 (S.D.N.Y. 2002) (rejecting defendant’s attempt to read 

into the plan language of Section 10A a scienter requirement that does not exist” (citation 

omitted)).

57. As a result of the Respondents’ conduct, Mancera violated, and Valdez and Corral 

caused Mancera to violate, Section 10A(a)(1) of the Exchange Act.

RULE 2-02(b)(1) OF REGULATION S-X

58. Rule 2-02(b) of Regulation S-X requires each accountant’s report to state “whether 

the audit was made in accordance with generally accepted auditing standards” (“GAAS”). 

“[R]eferences in Commission rules and staff guidance in the federal securities laws to GAAS or to 

specific standards under GAAS, as they relate to issuers, should be understood to mean the 

standards of the PCAOB plus any applicable rules of the Commission.” See SEC Release No. 34-
17

49708 (May 14, 2004). An audit firm violates Rule 2-02(b)(1) of Regulation S-X if it issues a 

report stating that it has conducted its audit in accordance with PCAOB standards when it has not. 

See In re Andrew Sims, CPA, Exchange Act Rel. No. 34-59584, (Mar. 17, 2009) (settled order); 

KPMG Australia, Admin. No. 3-14276 (Feb. 28, 2011) (settled order).

59. As a result of the conduct discussed above, Mancera violated Regulation S-X Rule 

2-02(b)(1) when it issued audit reports stating that it had conducted its audits in accordance with 

PCAOB standards when Mancera had not, and Valdez and Corral, as the audits’ engagement 

partner and senior manager, respectively, caused Mancera’s violations of that rule.

SECTION 13(a) OF THE EXCHANGE ACT AND RULE 13a-1 THEREUNDER

60. Section 13(a) of the Exchange Act and Rule 13a-1 thereunder require that every 

issuer of a security registered pursuant to Section 12 of the Exchange Act file with the Commission 

annual reports as the Commission may require. The obligation to file such reports embodies the 

requirement that they be true and correct. See, e.g., SEC v. Savoy Indus., 587 F.2d 1149, 1165 

(D.C. Cir. 1978). An issuer violates Section 13(a) of the Exchange Act and Rule 13a-1 thereunder 

when such issuer files with the Commission annual reports that contain materially false or 

misleading information. SEC v. Falstaff Brewing Corp., 629 F.2d 62, 72 (D.C. Cir. 1980). 

Scienter is not required for a violation of Section 13(a). SEC v. McNulty, 137 F.3d 732, 741 (2d 

Cir. 1998). 

61. Homex’s 2010, 2011 and 2012 Forms 20-F were materially false and incorrect 

because they contained audit reports falsely stating that Mancera audits of Homex were conducted 

in accordance with PCAOB standards. Through their conduct, as described above, the 

Respondents were a cause of Homex’s violations of these provisions in Homex’s 2010-2012 

Forms 20-F.

F. FINDINGS

62. Based on the foregoing, the Commission finds that: (a) Mancera, Valdez, and 

Corral engaged in improper professional conduct pursuant to Section 4C(a)(2) of the Exchange Act 

and Rule 102(e)(1)(ii) of the Commission’s Rules of Practice; (b) Mancera committed, and Valdez 

and Corral caused, violations of Section 10A(a)(1) of the Exchange Act and Rule 2-02(b)(1) of 

Regulation S-X; and (c) Mancera, Corral, and Valdez caused violations by Homex of Section 13(a) 

of the Exchange Act and Rule 13a-1 promulgated thereunder.

G. REMEDIAL ACTIONS

63. Since the Homex audits, Mancera, alone and in coordination with the global 

organization of the member firms of Ernst & Young, took a series of steps intended to enhance the 

relevant quality controls. In determining to accept Mancera’s Offer, the Commission considered 

the remedial actions undertaken.
18

H. UNDERTAKINGS

Mancera has undertaken to complete the following actions: 

1. Notification. Mancera shall provide all of its audit professionals both Spanish and 

English-language versions of this Order within ten (10) business days after entry of the Order.

2. Mancera Policies Report and Validation Plan. Within one hundred fifty (150) 

days after the entry of this Order, Mancera shall submit to the Commission staff a report (the 

“Mancera Policies Report”) describing in reasonable detail its quality controls set forth in its audit 

manual and audit-and quality-related guidance and policies, relating to its policies and procedures 

set forth therein for Mancera’s quality controls and its SEC issuer audit and interim review 

procedures regarding the audit subject areas specified below (hereinafter referred to as “Specified 

Mancera Policies”). The Mancera Policies Report shall also describe in reasonable detail 

Mancera’s methodology and work plan, including the internal quality inspection processes 

administered by Mancera, to review, test, and assess whether the Specified Mancera Policies are 

designed to provide reasonable assurance of compliance with Commission regulations and 

PCAOB standards and rules in the performance of SEC issuer audit and interim reviews (the 

“Validation Plan”). The Commission staff may make reasonable requests for further evidence of 

the quality controls and validation plan set forth in the Mancera Policies Report and Validation 

Plan, and Mancera agrees to provide such evidence. The Validation Plan, not unacceptable to the 

Commission staff, shall describe Mancera’s review, testing, and assessment of Specified Mancera 

Policies regarding the following audit subject areas:

a. exercising due professional care and professional skepticism in the planning and 

performance of the audit; 

b. consideration of fraud in a financial statement audit (including the risk of fraud 

involving the circumvention of controls), and appropriately responding to identified 

fraud risks;

c. evaluation of policies related to the acceptance and continuance of client 

relationships;

d. obtaining sufficient appropriate audit evidence; 

e. supervision of the audit engagement; and

f. audit documentation and retention.

3. Initial Validation Report and Certification. 

a. Initial Validation Report. Within two hundred seventy (270) days after the

issuance of the Mancera Policies Report and Validation Plan, Mancera shallsubmit 

to the Commission staff a written report setting forth a description of the testing, 

analysis, and results of its Validation Plan (“Validation Report”). In particular, the 
19

Validation Report shall describe (i) the results of the processes identified in 

Paragraph 2, above, as they relate to the Specified Mancera Policies identified in 

the Mancera Policies Report, (ii) any deficiencies involving the Specified Mancera 

Policies identified as a result of such processes, and (iii) any remedial actions taken 

in response thereto.

b. Initial Validation Certification. The Initial Validation Report shall include a

certification executed by the Managing Partner for Mancera (“MP”) that the 

Specified Mancera Policies are designed to provide reasonable assurance of 

compliance with Commission regulations and PCAOB standards and rules in the 

performance of SEC issuer audits and interim reviews, and if deficiencies in the 

design or operation of the Specified Mancera Policies are identified, shall report 

such deficiencies to the Commission staff (“Initial Validation Certification”). The 

Commission staff may make reasonable requests for further evidence of 

compliance, including the testing results, and Mancera agrees to provide such 

evidence. If substantial deficiencies are identified, Mancera shall report such 

deficiencies to the Commission staff and state that it cannot certify compliance.

4. Second Validation Plan. Within sixty (60) days after the issuance of the Initial 

Validation Report, Mancera shall submit to the Commission staff an updated validation plan not 

unacceptable to the Commission staff: (a) to review, test, and assess whether the Specified 

Mancera Policies are designed to provide reasonable assurance of compliance with Commission 

regulations and PCAOB standards and rules in the performance of SEC issuer audits and interim 

reviews; and (b) a remediation plan that contains a description of any deficiencies identified, and a 

schedule of remedial measures to correct substantial deficiencies (collectively, the “Second 

Validation Plan”).

5. Second Validation Report and Certification. 

a. Second Validation Report. Within one (1) year after the issuance of the Initial

Validation Report, Mancera shall submit to the Commission staff a written report 

setting forth a complete description of the testing, analysis, and results of its Second 

Validation Plan (“Second Validation Report”).

b. Second Validation Certification. The Second Validation Report shall include a

certification executed by the MP that the Specified Mancera Policies are designed 

to provide reasonable assurance of compliance with Commission regulations and 

PCAOB standards and rules in the performance of SEC issuer audits and interim 

reviews, and if deficiencies in the design or operation of the Specified Mancera

Policies are identified, shall report such deficiencies to the Commission staff 

(“Second Validation Certification”). The Commission staff may make reasonable 

requests for further evidence of compliance, including the testing results, and 

Mancera agrees to provide such evidence. If substantial deficiencies are identified,

Mancera shall report such deficiencies to Commission staff and state that it cannot 

certify compliance.
20

6. Subsequent Plans, Reports, and Certifications. If Mancera identifies substantial 

deficiencies in the design or operation of the Specified Mancera Policies in the Second Validation 

Report, Mancera shall repeat the undertakings described in Paragraphs 4 and 5 annually until such 

time that no substantial deficiencies are identified. At that time, Mancera shall issue a Final 

Validation Report that includes a certification executed by the MP that Mancera executed the Final 

Validation Plan, that the Specified Mancera Policies are operating as designed and provide 

reasonable assurance of compliance with all Commission regulations and PCAOB standards and 

rules in the performance of SEC issuer audits and interim reviews, and that Mancera has complied 

with the undertakings described in Paragraphs 8 and 9, below (“Final Validation Certification”).

7. Internal Team Leader. Mancera shall appoint an Internal Team Leader (“ITL”) 

knowledgeable and experienced in U.S. GAAP, Commission regulations, and PCAOB standards 

and rules, and not unacceptable to Commission staff, to oversee these undertakings. If for any 

reason any vacancy occurs in the ITL position, Mancera shall promptly appoint a successor ITL, 

who shall likewise be knowledgeable and experienced in U.S. GAAP, Commission regulations, 

and PCAOB standards and rules, and likewise be not unacceptable to Commission staff, to oversee 

these undertakings. By so doing, Mancera shall maintain an ITL until all undertakings have been 

deemed satisfied by the Commission staff, per the terms of Paragraph 11, below. The ITL shall 

have overall responsibility for the planning and scope of all Validation Plans. The ITL also shall 

have overall responsibility for developing the methodology for the selection of Mancera controls 

subject to review not unacceptable to Commission staff. The methodology used to select Mancera 

controls subject to review shall be designed to include the operation of these controls on the audits 

of SEC Registrant clients, including those designated as clients subject to expanded monitoring 

procedures (“Close Monitoring Clients”). The ITL shall also oversee testing to determine whether 

the controls result in SEC registrant clients receiving the appropriate risk designations, including 

designation as Close Monitoring Clients, as appropriate. The ITL shall engage Mancera 

professionals with appropriate experience, and outside consultants or third-party support, if needed, 

to develop the Validation Plans and to perform all reviews, testing, and preparation of all reports 

described in these undertakings. The ITL shall oversee the preparation of all reports submitted to 

the Commission staff. Mancera shall provide the ITL with staffing and other resources as 

necessary to accomplish these undertakings in a timely manner. Mancera shall not impose any 

planning or limitations on the ITL in the execution of his or her duties and shall not interfere or 

attempt to influence the ITL during the course of these undertakings. 

8. Mancera Auditor Training. Within two hundred seventy (270) days of the date 

of this Order, Mancera shall require each audit professional working on any SEC registrant client 

audit to complete successfully a minimum of 32 hours of audit-related training. This audit-related 

training shall cover the audit subject areas specified in Paragraph 2 above, with the following 

topics being accorded at least the following minimum number of training hours: 

a. At least 8 hours relating to the exercise of due care and professional skepticism in 

evaluating audit evidence, including in corroborating management’s explanations 

and representations; 

b. At least 8 hours related to fraud-detection training. This training shall include 

techniques for detecting and responding, in the course of SEC registrant audits, to 
21

possible fraud by audit clients, or audit client employees, officers or directors. This 

training will focus particular attention on the auditor’s consideration of the impact 

of audit findings on the assessment of fraud risks as discussed in AS 2810 (Par. 28-

29), as well as the documentation requirements outlined in AS § 2401.83. This

training will also detail the auditor’s responsibilities under Section 10A of the 

Exchange Act; 

c. At least 3 hours related to the auditor’s responsibilities with respect to audit 

documentation, including evidence obtained, significant findings and resulting 

actions, work paper sign-off, archiving, dating, and the retention of the foregoing, 

including the auditor’s responsibilities with respect to AS 1215 and Rule 2-06 of 

Regulation S-X; and

d. For engagement partners, senior managers and managers, at least 8 hours relating to 

supervision, including the review of work performed by the engagement team (as 

set forth in AS 1201).

9. Recordkeeping. Mancera shall preserve and retain all documentation regarding all 

certifications and reports for seven (7) years and will make it available to the staffs of the 

Commission or the PCAOB upon request. 

10. Submissions to the Commission Staff. The Commission staff may request access 

to documents, internal review and PCAOB inspection materials, training materials, Mancera 

personnel, and/or meetings with Mancera, within thirty (30) days of receipt of any Report, Plan, or 

Certification. Within fifteen (15) days of receipt of the above requested information or meetings, 

the Commission staff may submit to Mancera any questions regarding the Reports, Plans, or 

Certifications, and Mancera agrees to address all such questions within fifteen (15) days of receipt. 

Unless otherwise directed by the Commission staff, all Reports, Plans and Certifications mentioned 

in these undertakings shall be submitted to Melissa Hodgman, Associate Director, Division of 

Enforcement, Mail Stop 5553, Securities and Exchange Commission, 100 F Street, NE, 

Washington, DC 20549, or such other person as the Commission staff may request, with a copy to 

the Office of Chief Counsel of the Enforcement Division (the “Designees”). Mancera will make 

all Reports, Plans, and Certifications available to PCAOB staff upon request. All such Reports, 

Plans, Certifications, and other documents provided to the Commission staff pursuant to these 

undertakings likely will include proprietary, financial, confidential, and competitive business 

information. Public disclosure of the reports could discourage cooperation, impede pending or 

potential government investigations or undermine the objectives of the reporting requirement. For 

these reasons, among others, the reports and the contents thereof are intended to remain and shall 

remain non-public, except (a) pursuant to court order, (b) as agreed by the parties in writing, (c) to 

the extent that the Commission staff determines in its sole discretion that disclosure would be in 

furtherance of the Commission’s discharge of its duties and responsibilities, or (d) is otherwise 

required by law.

11. Satisfaction. Unless otherwise notified by the Division of Enforcement, these 

undertakings are deemed satisfied upon the later of: (a) three years after the entry of this Order; or 
22

(b) written confirmation by the Designees that they have received a Final Validation Certification 

free from substantial deficiencies.

12. Deadlines. For good cause shown, the Commission staff may extend any of the 

procedural dates relating to the undertakings. Deadlines for procedural dates shall be counted in 

calendar days, except that if the last day falls on a weekend or federal holiday, the next business 

day shall be considered to be the last day. 

13. Cooperation. Mancera shall cooperate fully with the Commission with respect to 

this proceeding and any related judicial or administrative proceeding or investigation commenced 

by the Commission or to which the Commission is a party. Mancera’s cooperation shall include, 

but is not limited to: (i) using reasonable efforts to secure the attendance and truthful statements or 

testimony of any current partner, agent, or employee of Mancera at such times and places as the 

staff requests upon reasonable notice; (ii) promptly and fully cooperating by taking any steps 

necessary to render documents or records produced by Mancera admissible in any U.S. court 

proceedings, which may include, without limitation, providing business-records certifications 

requested by the Commission; (iii) accepting service by mail or facsimile transmission of notices 

or subpoenas issued by the Commission for documents or testimony at depositions, hearings, or 

trials, or in connection with any related investigation by Commission staff; (iv) appointing George 

Canellos, Esq., Partner at Milbank LLP, 55 Hudson Yards, New York, NY US 10001-2163, as 

agent to receive service of such notices and subpoenas; (v) with respect to such notices and 

subpoenas, waiving the territorial limits on service contained in Rule 45 of the Federal Rules of 

Civil Procedure and any applicable local rules, provided that the party requesting the testimony 

reimburses Mancera’s travel, lodging, and subsistence expenses at the then-prevailing U.S. 

Government per diem rates; and (vi) consenting to personal jurisdiction over Mancera in any 

United States District Court for purposes of enforcing any such subpoena.

14. Petition to Reopen Matter. Mancera agrees that if the Division of Enforcement 

believes that Mancera has not satisfied these undertakings, it may petition the Commission to 

reopen the matter to determine whether additional sanctions are appropriate.

15. In determining whether to accept Mancera’s Offer, the Commission has considered 

the undertakings in Paragraphs 1, 13 and 14, above.

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondents’ Offers.

Accordingly, it is hereby ORDERED, effective immediately, that:

A. Respondents shall cease and desist from committing or causing any violations and 

any future violations of Sections 10A(a)(1), and 13(a) of the Exchange Act and Rule 13a-1 

promulgated thereunder, and Rule 2-02(b)(1) of Regulation S-X.

B. Mancera is hereby censured.
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C. Mancera shall comply with the undertakings enumerated in Paragraphs 2 through 12 

of Section III.H., above.

D. Mancera shall, within 14 days of the entry of this Order, pay disgorgement of 

$950,000.00, prejudgment interest of $139,926.43, and a civil money penalty in the amount of 

$500,000.00 to the Securities and Exchange Commission. If timely payment of disgorgement and 

prejudgment interest is not made, additional interest shall accrue pursuant to SEC Rule of Practice 

600 and if timely payment of a civil money penalty is not made, additional interest shall accrue 

pursuant to 31 U.S.C. § 3717.

E. Payment ordered in Paragraph D above must be made in one of the following ways: 

(1) Mancera may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;

(2) Mancera may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Mancera may pay by certified check, bank cashier’s check, or United States 

postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying 

Mancera as a Respondent in these proceedings, and the file number of these proceedings; a copy of 

the cover letter and check or money order must be sent to Melissa R. Hodgman, Associate 

Director, Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, 

Washington, DC 20549. 

F. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is created 

for the disgorgement, prejudgment interest and penalties referenced in paragraph D above. The Fair 

Fund may be added to or combined with any other fund created in a related action arising out of the 

same investigative matter that is the basis of this action. Amounts ordered to be paid as civil money 

penalties pursuant to this Order shall be treated as penalties paid to the government for all 

purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, Mancera

agrees that in any Related Investor Action, it shall not argue that it is entitled to, nor shall it benefit 

by, offset or reduction of any award of compensatory damages by the amount of any part of 

Mancera’s payment of a civil penalty in this action (“Penalty Offset”). If the court in any Related 

Investor Action grants such a Penalty Offset, Mancera agrees that it shall, within 30 days after 
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entry of a final order granting the Penalty Offset, notify the Commission’s counsel in this action 

and pay the amount of the Penalty Offset to the Securities and Exchange Commission. Such a 

payment shall not be deemed an additional civil penalty and shall not be deemed to change the 

amount of the civil penalty imposed in this proceeding. For purposes of this paragraph, a “Related 

Investor Action” means a private damages action brought against Mancera by or on behalf of one 

or more investors based on substantially the same facts as alleged in the Order instituted by the 

Commission in this proceeding.

G. Valdez and Corral are denied the privilege of appearing or practicing before the 

Commission as an accountant.

H. After five years from the date of this order for Valdez, and after two years 

from the date of this order for Corral, Valdez and Corral may separately request that the 

Commission consider each of their reinstatements by submitting an application (attention: 

Office of the Chief Accountant) to resume appearing or practicing before the Commission as:

 

 1. a preparer or reviewer, or a person responsible for the preparation or review, 

of any public company’s financial statements that are filed with the 

Commission (other than as a member of an audit committee, as that term is 

defined in Section 3(a)(58) of the Securities Exchange Act of 1934). Such 

an application must satisfy the Commission that Respondent’s work in his

practice before the Commission as an accountant will be reviewed either by 

the independent audit committee of the public company for which he works 

or in some other acceptable manner, as long as he practices before the 

Commission in this capacity; and/or

2. a preparer or reviewer, or a person responsible for the preparation or review, 

of any public company’s financial statements that are filed with the 

Commission as a member of an audit committee, as that term is defined in 

Section 3(a)(58) of the Securities Exchange Act of 1934. Such an 

application will be considered on a facts and circumstances basis with 

respect to such membership, and the applicant’s burden of demonstrating 

good cause for reinstatement will be particularly high given the role of the 

audit committee in financial and accounting matters; and/or

3. an independent accountant. 

Such an application must satisfy the Commission that:

 

 (a) Respondent, or the public accounting firm with which he is 

associated, is registered with the Public Company Accounting 

Oversight Board (“Board”) in accordance with the Sarbanes-Oxley 

Act of 2002, and such registration continues to be effective;
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(b) Respondent, or the registered public accounting firm with which he

is associated, has been inspected by the Board and that inspection 

did not identify any criticisms of or potential defects in the 

respondent’s or the firm’s quality control system that would 

indicate that Respondent will not receive appropriate supervision;

(c) Respondent has resolved all disciplinary issues with the Board, and 

has complied with all terms and conditions of any sanctions 

imposed by the Board (other than reinstatement by the 

Commission); and

(d) Respondent acknowledges his responsibility, as long as he appears 

or practices before the Commission as an independent accountant, 

to comply with all requirements of the Commission and the Board, 

including, but not limited to, all requirements relating to 

registration, inspections, concurring partner reviews and quality 

control standards. 

I. The Commission will consider an application by Valdez or Corral separately to 

resume appearing or practicing before the Commission provided that their respective contador 

público license is current and Valdez or Corral has resolved all other disciplinary issues with the 

applicable boards of accountancy. However, if such licensure is dependent on reinstatement by 

the Commission, the Commission will consider an application on its other merits. The 

Commission’s review may include consideration of, in addition to the matters referenced above, 

any other matters relating to Valdez’s or Corral’s character, integrity, professional conduct, or 

qualifications to appear or practice before the Commission as an accountant. Whether an 

application demonstrates good cause will be considered on a facts and circumstances basis with 

due regard for protecting the integrity of the Commission’s processes.

By the Commission.

Vanessa A. Countryman

Secretary