Ernst & Young has agreed to pay more than $4M to settle charges levied by the Securities and Exchange Commission that it violated auditor independence rules by lobbying for two audit clients.

Such lobbying activities are impermissible because they put a firm in the position of being an advocate for those audit clients.

"Despite providing the prohibited legislative advisory services on behalf of the clients, E&Y repeatedly represented that it was 'independent' in audit reports issued on the clients’ financial statements," according to the SEC.

"Auditor independence is critical to the integrity of the financial reporting process. When an auditor acts as an advocate for its audit client, that independence is compromised," said Scott Friestad, associate director in the SEC's Division of Enforcement, said in a statement. "Ernst & Young engaged in lobbying activities that constituted improper advocacy and clearly violated the rules."

The SEC charged that E&Y's Washington Council EY impaired the firm’s independence by,

1) Sending letters signed by a senior executive of an Ernst & Young audit client to congressional staff, urging passage of certain legislation;

2) asking congressional staff to insert language into a bill that was favorable to the business interests of the firm's;

3) meeting with congressional staff in order to defeat legislation detrimental to the business interests of the audit client.

4) asking third parties to approach a U.S. senator in order to seek support for a legislative amendment sought by an audit client, and

5) marking up a draft of a bill by inserting an audit client’s language and sending it to congressional staff.

A spokesperson for E&Y said "auditor independence is of paramount importance to the company" and that E&Y voluntarily ended lobbying work for SEC registrant audit clients in 2012.