UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
Securities Exchange Act of 1934
Release No. 41284 \ April 14, 1999
Accounting and Auditing Enforcement
Release No. 1125 \ April 14, 1999
Administrative Proceeding
File No. 3-9873
In the Matter of :
:
MICHAEL, ADEST & :
BLUMENKRANTZ, P.C., : ORDER INSTITUTING PROCEEDINGS
DAVID
MICHAEL, CPA, AND : PURSUANT TO RULE 102(e) OF THE
PAUL
ADEST, CPA, : COMMISSION’S RULES OF
PRACTICE,
: MAKING FINDINGS AND IMPOSING
: REMEDIAL SANCTIONS
Respondents. :
:
I.
The Securities and Exchange Commission ("Commission") deems
it appropriate and in the public interest that public
administrative proceedings be, and they hereby are, instituted,
pursuant to Rule 102(e)(1)(ii)[1] of the Commission’s Rules of
Practice against Michael, Adest & Blumenkrantz, P.C. ("MA&B"),
David Michael ("Michael"), and Paul Adest ("Adest").
II.
In anticipation of the institution of these proceedings,
MA&B, Michael and Adest (collectively the "Respondents"), have
each submitted an Offer of Settlement, 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 in which the Commission is a party, without
admitting or denying the findings set forth herein, except as to
SNIPPETS:
SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission deems it appropriate and in the public interest that
Respondents engaged in improper professional conduct in connection with their audit of the
Respondents issued an audit report containing an unqualified opinion on Power Phone’s
In fact, Respondents did not comply with GAAS in their audit of Power Phone’s financial
David Michael, 61 years old and a resident of Bellmore, New York, is a certified public
Michael is a partner atshareholder of MA&B and was the engagement partner on the audit of
Adest directly participated in determining how Power Phone’s assets should be reflected in
Significantly, Power Phone did not own either the artwork or the ASAP software as of June 30,
the evidence indicates that Power Phone simply acquired a license to use the software rather
Similarly, Power Phone could not claim that it owned the artwork as of June 30, 1995, because
Power Phone issued 80,000 shares of preferred stock to the purported vendor of the artwork
Moreover, there was no evidence to support the $25 per share value for the preferred stock,
Specifically, Respondents did not comply with GAAS in their audit of Power Phone’s financial
assets.
Instead of auditing the contract as written, the auditors permitted Power Phone to revise the
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