The SEC has again taken action against an audit firm that allegedly caused investment advisers’ violations of Rule 206(4)-2 under the Investment Advisers Act of 1940, the so-called “custody rule.” A recent settlement order with an audit firm asserts that the firm’s audits of certain private funds failed to satisfy the custody rule because the firm was not “independent” within the meaning of certain rules under Regulation S‑X. The audit firm also allegedly caused some broker-dealers that it audited to run afoul of other applicable SEC rules for the same reason. This action is an important reminder that investment advisers must ensure that their auditors confirm that they are eligible to conduct custody rule audits. This article examines the SEC’s allegations and the terms of the settlement. See “The Importance of Exercising Due Diligence When Hiring Auditors and Other Vendors” (Jun. 21, 2018); and our two-part series “Avoiding Common Pitfalls Under the Custody Rule”: Inadvertent Custody, Delivery Failures and GAAP Compliance (Mar. 23, 2017); and Custody Determination, Auditor Independence and Liquidation Audits (Apr. 6, 2017).