The Securities and Exchange Commission (SEC) has banned a Florida-based certified public accountant from engagements with any SEC-regulated institution after an investigation found his audit work for eight publicly traded companies was ‘so deficient that they amounted to no audits at all’
Terry Johnson has agreed to settle fraud charges brought by the SEC, repay his audit fees of $96,000 ($61,000) and pay a penalty of $50,000 ($32,000). The charges relate to audits and quarterly reviews he carried out for eight publicly traded companies, along with issuing false and misleading audit opinions on the companies’ annual financial statements.
At least one of the companies in question was connected with another former certified public accountant subject to an SEC ban, Stephen Corso, who has a conviction for wire fraud and attempted tax evasion. During its investigation, the SEC found that following his release from prison, Corso served as the chief financial officer of several publicly-traded companies, including Primco Management, Inc., one of Johnson’s audit clients.
Corso signed Primco’s annual and quarterly financial reports and certifications and filed with the SEC using aliases, despite a 2009 bar from the SEC from appearing or practising as an accountant, Corso, who is from California, is also alleged to have solicited business on the false pretence that he was an ‘SEC consultant and attorney'.
With regard to Johnson, who was charged with engaging in improper professional conduct and wilfully violating federal anti-fraud laws, the US regulator said Johnson’s numerous audit deficiencies included the failure to properly plan audits, obtain sufficient appropriate audit evidence, and maintain audit documentation.
Johnson allegedly falsely stated in audit reports that he conducted his audits in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB), even though his conduct of the audits violated numerous PCAOB auditing standards.
He also created back-dated, fake work papers to create the false appearance of having proper work papers once he learned he was the subject of an SEC investigation.
Michael Maloney, chief accountant at the SEC’s enforcement division, said: ‘Johnson’s audits provided investors with the false impression that his audits of multiple issuers comported with professional auditing standards, when in fact they were so deficient that they amounted to no audits at all.’
The regulator has now also obtained a court order requiring Corso to repay the $460,000 (£296,000) he earnt as a result of ignoring his earlier ban, plus $29,938 (£19,250) in prejudgment interest. Corso is also required to remove from the Internet all references to himself as an ‘SEC consultant and attorney’.
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