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SEC ADMINISTRATIVE PROCEEDING
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EXTRACTED KEY WORDS
ALLEGES ACCOUNTANT FIRSTMARK SECURITIES EXCHANGE CERTIFIED PUBLIC ACCOUNTANT AUDIT INVESTMENT REPORT PRE-TAX INCOME COMMISSION ENFORCEMENT INSTITUTING PUBLIC ACCOUNTANT SCOTT ALLEGING INFLATE STOCK PRACTICE LISTING NASDAQ NATIONAL MARKET AMERICAN STOCK EXCHANGE ELIGIBILITY INFLATE EARNINGS DESPITE UNQUALIFIED OPINION PUBLIC HEARING ALLEGATIONS REMEDIAL SANCTIONS ISSUED PURSUANT |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Securities Exchange Act of 1934
Release No. 42910 / June 8, 21000
Accounting and Auditing Enforcement
Release No. 1271 / June 8, 2000
Administrative Proceeding File No. 3-10220
PROCEEDINGS INSTITUTED AGAINST CERTIFIED PUBLIC ACCOUNTANT SCOTT E.
EDWARDS ALLEGING IMPROPER PROFESSIONAL CONDUCT
The Commission announced today the entry of an order instituting
proceedings against certified public accountant Scott E. Edwards
("Edwards"), alleging that Edwards engaged in improper professional
conduct with respect to his audit of the financial statements of
Firstmark Corp. ("Firstmark") for the fiscal year ended June 30, 1995.
Edwards resides in Bangor, Maine.
In the Order, the Division of Enforcement ("Division") alleges that,
in its Form 10-KSB for that period, Firstmark inflated and improperly
accounted for the value of its investments in two start-up companies.
As a result, Firstmark reported pre-tax income of $771,895 when it
should have reported a loss of $54,886. The Division alleges that,
during the audit, Edwards learned that (1) Firstmark's investment in
one of the companies had become worthless and should have been written
off and (2) Firstmark had improperly recognized income on the
appreciation in the value of its investment in the second company by
reclassifying the restricted stock it owned in that company as a
trading security. The Division further alleges that Edwards knew that
Firstmark's management hoped to apply for listing on the NASDAQ
National Market or the American Stock Exchange, which required at
least $750,000 in pre-tax income for eligibility, and thus had a
motive to inflate earnings. The Division alleges that, despite the
knowledge he possessed concerning the matters set forth above, Edwards
issued an audit report containing an unqualified opinion. The Order
alleges that, by these activities, Edwards engaged in improper
professional conduct under Rule 102(e) of the Commission's Rules of
Practice.
A public hearing will be scheduled to determine whether the
allegations against Edwards are true and, if so, whether any remedial
sanctions should be issued pursuant to Rule 102(e) of the Commission's
Rules of Practice.
_________________________________________________________________
Modified 11/01/2000
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