In re Andrew M. Smith
summary
Andrew M. Smith, a California CPA, willfully violated Sarbanes-Oxley Section 102(a) by issuing unlawful audit reports for three SEC-registered companies in 2003 without PCAOB registration, resulting in a cease-and-desist order, censure, and a ban on audit compensation unless properly registered.
paragraph
Andrew M. Smith, a licensed CPA, issued audit reports for Safe Travel Care, Meridian Holdings, and InterCare DX in 2003 without being registered with the PCAOB, as required by Section 102(a) of the Sarbanes-Oxley Act after April 25, 2003. He received $9,500 in audit fees for these unlawful engagements and voluntarily reimbursed the companies, eliminating the need for disgorgement. As part of a settlement with the SEC, Smith agreed to a cease-and-desist order, censure, and a prohibition on accepting audit compensation from these issuers unless his firm is PCAOB-registered and he provides proof of registration to the SEC’s Office of the Chief Accountant.
narrative
Andrew M. Smith, a California-licensed CPA since 1972, issued audit reports for three SEC-registered public companies—Safe Travel Care, Meridian Holdings, and InterCare DX—for their fiscal year ended December 31, 2003, despite not being registered with the Public Company Accounting Oversight Board (PCAOB), a requirement mandated by Section 102(a) of the Sarbanes-Oxley Act effective April 25, 2003. Smith received $9,500 in audit fees for these engagements, which were unlawful because PCAOB registration was mandatory for auditors of public companies after that date. During the SEC’s investigation, Smith voluntarily reimbursed the three companies for the full amount of the fees, leading the SEC to forgo seeking disgorgement. Without admitting or denying the findings, Smith consented to a cease-and-desist order, a formal censure, and a prohibition on accepting compensation for audit work from these issuers unless his firm is properly registered with the PCAOB and he submits proof of registration to the SEC’s Office of the Chief Accountant. The SEC accepted his settlement offer, acknowledging his cooperation while emphasizing the seriousness of violating the PCAOB registration requirement. Smith’s conduct constituted a willful violation of federal securities laws, and the sanctions were designed to deter similar misconduct by individual auditors. The case underscores the SEC’s enforcement of PCAOB registration as a non-negotiable safeguard for audit integrity in public markets.
Classified accounting-fraud(confidence 100%). EDGAR detection: forms 10-K/10-Q/8-K/NT 10-K· recall 80% / precision 48%. detection rule →
Statutes
SECTIONS 4C AND 21C OF THE SECURITIES EXCHANGE ACTSECTIONS 4C AND 21C OF THE SECURITIES EXCHANGE ACTSections 4C 1 and 21C of the Securities Exchange Act
Parties
safe travelsafe travel care, inc.the securities and exchange commission
Keywords
commissionsafe travelsmithsecurities exchangeaudit reportexchangeauditsafetravelmeridianintercarerespondentsecuritiesandrew smithtravel meridian
Extracted insights
Dollar amounts 5
- $5.30M $5.3 million $1M–$10M
- $2.60M $2.6 million $1M–$10M
- $1.50M $1.5 million $1M–$10M
- $146K $146,000 $100K–$1M
- $10K $9,500 <$10K
Entities 3
- person safe travel
- company safe travel care, inc.
- agency the securities and exchange commission
Triples 8
- The Securities and Exchange Commission deems it appropriate public administrative and cease-and-desist proceedings be, and hereby are, instituted against Andrew M. Smith, CPA
- Respondent has submitted an Offer of Settlement
- Respondent consents to the entry this Order Instituting Public Administrative and Cease-and-Desist Proceedings
- Andrew M. Smith, CPA is a certified public accountant licensed in the state of California since 1972
- Smith audited Safe Travel Care, Inc.’s, Meridian Holdings, Inc.’s, and InterCare DX, Inc.’s financial statements
- Safe Travel Care, Inc. is a Nevada corporation based in Cardiff, California
- Safe Travel traded on the OTC Bulletin Board
- Safe Travel reported no revenue and total assets of $146,000 for fiscal year ended December 31, 2003
PDF
Text layers
Extracted body text (10,213c)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
CORRECTED
SECURITIES EXCHANGE ACT OF 1934
Release No. 56398 / September 13, 2007
ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 2678 / September 13, 2007
ADMINISTRATIVE PROCEEDING
File No. 3-12803
In the Matter of
Andrew M. Smith, CPA,
Respondent.
ORDER INSTITUTING PUBLIC
ADMINISTRATIVE AND CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO
SECTIONS 4C AND 21C OF THE
SECURITIES EXCHANGE ACT OF 1934
AND RULE 102(e) OF THE
COMMISSION’S RULES OF PRACTICE,
MAKING FINDINGS, AND IMPOSING
REMEDIAL SANCTIONS AND A CEASE-
AND-DESIST ORDER
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate that public
administrative and cease-and-desist proceedings be, and hereby are, instituted against Andrew M.
Smith, CPA (“Respondent” or “Smith”) pursuant to Sections 4C
1
and 21C of the Securities
Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(iii) of the Commission’s Rules of
Practice.
2
1
Section 4C provides, in relevant part, that:
The Commission may censure any person, or deny, temporarily or permanently,
to any person the privilege of appearing or practicing before the Commission in
any way, if that person is found . . . to have willfully violated, or willfully aided
and abetted the violation of, any provision of the securities laws or the rules and
regulations thereunder.
2
Rule 102(e)(1)(iii) provides, in relevant part, that:
The Commission may censure a person or deny, temporarily or permanently, the
privilege of appearing or practicing before it in any way to any person who is
found . . . to have willfully violated, or willfully aided and abetted the violation of
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (“Offer”), 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 to
which the Commission is a party, and without admitting or denying the findings herein, except as
to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are
admitted, Respondent consents to the entry of this Order Instituting Public Administrative and
Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of
1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing
Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds
3
that:
A. RESPONDENT
Andrew M. Smith, CPA, age 58, of Los Angeles, California, is a certified public
accountant licensed in the state of California since 1972, doing business as a sole proprietorship.
Smith audited Safe Travel Care, Inc.’s, Meridian Holdings, Inc.’s, and InterCare DX, Inc.’s
financial statements for each company’s respective 2003 fiscal year ended December 31, 2003.
B. FACTS
1. Safe Travel Care, Inc. (“Safe Travel”) is a Nevada corporation based in Cardiff,
California. During the relevant period, Safe Travel’s common stock traded on the OTC Bulletin
Board. Its common stock is registered with the Commission pursuant to Section 12(g) of the
Exchange Act. Safe Travel reported no revenue and total assets of $146,000 for fiscal year ended
December 31, 2003.
2. Meridian Holdings, Inc. (“Meridian”) is a Colorado corporation based in Culver
City, California. Meridian’s common stock trades on the Pink Sheets under the symbol
MRDH.PK and is registered with the Commission pursuant to Section 12(g) of the Exchange Act.
The company reported revenues of approximately $2.6 million and total assets of $5.3 million for
fiscal year ended December 31, 2003.
any provision of the Federal securities laws or the rules and regulations
thereunder.
3
The findings herein are made pursuant to Respondent’s Offer of Settlement and are not
binding on any other person or entity in this or any other proceeding.
2
3. InterCare DX, Inc. (“InterCare”) is a California corporation based in Los Angeles,
California. InterCare’s common stock trades on the OTC Bulletin Board under the symbol
ICCO.OB and is registered with the Commission pursuant to Section 12(g) of the Exchange Act.
The company reported no revenue and total assets of $1.5 million for fiscal year ended December
31, 2003.
4. Safe Travel, Meridian, and InterCare, each, has at all relevant times been an issuer
as defined by the Sarbanes-Oxley Act of 2002 (the “Act”).
5. Smith audited Safe Travel’s 2003 financial statements included in Safe Travel’s
annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on May 6, 2004.
As part of that audit, Smith prepared and issued an audit report dated February 20, 2004 (the “Safe
Travel audit report”), which the company included in its 2003 Form 10-KSB. Smith audited
Meridian’s 2003 financial statements included in Meridian’s annual report for fiscal year 2003 on
Form 10-KSB, filed with the Commission on April 1, 2004. As part of that audit, Smith prepared
and issued an audit report dated March 31, 2004 (the “Meridian audit report”), which the company
included in its 2003 Form 10-KSB. Smith audited InterCare’s 2003 financial statements included
in InterCare’s annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on
March 31, 2004. As part of that audit, Smith prepared and issued an audit report, also dated March
31, 2004 (the “InterCare audit report”), which the company included in its 2003 Form 10-KSB.
Safe Travel, Meridian, and InterCare, collectively, paid Smith $9,500 for the audit work.
4
6. At the time Smith prepared and issued the Safe Travel, Meridian, and InterCare
audit reports, he was not registered with the Public Company Accounting Oversight Board (the
“Board”), as required by Section 102(a) of the Act.
C. VIOLATIONS
1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is
not a registered public accounting firm to prepare or issue, or to participate in the preparation or
issuance of, any audit report with respect to any issuer.”
5
2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.
6
4
During the course of the Commission’s investigation, Smith voluntarily reimbursed Safe
Travel, Meridian, and InterCare the $9,500 in audit fees through the provision of non-audit or
other services to the issuers. In view of Smith’s reimbursement, the Commission is not ordering
disgorgement in this matter.
5
A violation of the Act or any rule that the Board issues under the Act is treated for all
purposes in the same manner as a violation of the Exchange Act, including with respect to
penalties. Sarbanes-Oxley Act of 2002, 15 U.S.C.A. § 7202(b)(1) (West 2002).
6
Section 102(a) became effective “[b]eginning 180 days after the date of the determination
of the Commission under Section 101(d)” of the Act that the Board was prepared to undertake its
statutory responsibilities. The Commission made the required determination on April 25, 2003.
3
3. Based on the conduct described above, Respondent willfully
7
violated Section
102(a) of the Act.
D. FINDINGS
Based on the foregoing, the Commission finds that Smith willfully violated Section 102(a)
of the Sarbanes-Oxley Act of 2002.
E. UNDERTAKING
Respondent undertakes not to request, demand, or accept, directly or indirectly, any
compensation from Safe Travel, Meridian, and InterCare in connection with the audit work
associated with the audit reports for these companies. In determining whether to accept the Offer,
the Commission has considered this undertaking.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent’s Offer.
Accordingly, it is hereby ORDERED, effective immediately, that:
A. Smith shall cease and desist from committing or causing any violations and any
future violations of Section 102(a) of the Act.
B. Smith is censured.
C. Smith may practice before the Commission as an independent accountant provided
that:
1. The public accounting firm with which he is associated is registered with
the Board in accordance with the Act, and such registration continues to be effective; and
See Order Regarding Section 101(d) of the Sarbanes-Oxley Act of 2002, Securities Act Release
No. 8223, Exchange Act Release No. 47746, 2003 WL 1956164 (Apr. 25, 2003).
7
“Willfully” as used in this Offer means intentionally committing the act that constitutes
the violation. There is no requirement that the actor also be aware that he is violating a rule or
statute.
See Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8
(2d Cir. 1965).
4
2. He has submitted to the Commission staff (attention: Office of the Chief
Accountant) the Board’s letter notifying the public accounting firm with which he is associated that
its registration application has been approved.
By the Commission.
Nancy M. Morris
Secretary
5OCR text (9,903c · tika · 95% conf)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
CORRECTED
SECURITIES EXCHANGE ACT OF 1934
Release No. 56398 / September 13, 2007
ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 2678 / September 13, 2007
ADMINISTRATIVE PROCEEDING
File No. 3-12803
In the Matter of
Andrew M. Smith, CPA,
Respondent.
ORDER INSTITUTING PUBLIC
ADMINISTRATIVE AND CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO
SECTIONS 4C AND 21C OF THE
SECURITIES EXCHANGE ACT OF 1934
AND RULE 102(e) OF THE
COMMISSION’S RULES OF PRACTICE,
MAKING FINDINGS, AND IMPOSING
REMEDIAL SANCTIONS AND A CEASE-
AND-DESIST ORDER
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate that public
administrative and cease-and-desist proceedings be, and hereby are, instituted against Andrew M.
Smith, CPA (“Respondent” or “Smith”) pursuant to Sections 4C1 and 21C of the Securities
Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(iii) of the Commission’s Rules of
Practice.2
1 Section 4C provides, in relevant part, that:
The Commission may censure any person, or deny, temporarily or permanently,
to any person the privilege of appearing or practicing before the Commission in
any way, if that person is found . . . to have willfully violated, or willfully aided
and abetted the violation of, any provision of the securities laws or the rules and
regulations thereunder.
2 Rule 102(e)(1)(iii) provides, in relevant part, that:
The Commission may censure a person or deny, temporarily or permanently, the
privilege of appearing or practicing before it in any way to any person who is
found . . . to have willfully violated, or willfully aided and abetted the violation of
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (“Offer”), 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 to
which the Commission is a party, and without admitting or denying the findings herein, except as
to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are
admitted, Respondent consents to the entry of this Order Instituting Public Administrative and
Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of
1934 and Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing
Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds3 that:
A. RESPONDENT
Andrew M. Smith, CPA, age 58, of Los Angeles, California, is a certified public
accountant licensed in the state of California since 1972, doing business as a sole proprietorship.
Smith audited Safe Travel Care, Inc.’s, Meridian Holdings, Inc.’s, and InterCare DX, Inc.’s
financial statements for each company’s respective 2003 fiscal year ended December 31, 2003.
B. FACTS
1. Safe Travel Care, Inc. (“Safe Travel”) is a Nevada corporation based in Cardiff,
California. During the relevant period, Safe Travel’s common stock traded on the OTC Bulletin
Board. Its common stock is registered with the Commission pursuant to Section 12(g) of the
Exchange Act. Safe Travel reported no revenue and total assets of $146,000 for fiscal year ended
December 31, 2003.
2. Meridian Holdings, Inc. (“Meridian”) is a Colorado corporation based in Culver
City, California. Meridian’s common stock trades on the Pink Sheets under the symbol
MRDH.PK and is registered with the Commission pursuant to Section 12(g) of the Exchange Act.
The company reported revenues of approximately $2.6 million and total assets of $5.3 million for
fiscal year ended December 31, 2003.
any provision of the Federal securities laws or the rules and regulations
thereunder.
3 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not
binding on any other person or entity in this or any other proceeding.
2
3. InterCare DX, Inc. (“InterCare”) is a California corporation based in Los Angeles,
California. InterCare’s common stock trades on the OTC Bulletin Board under the symbol
ICCO.OB and is registered with the Commission pursuant to Section 12(g) of the Exchange Act.
The company reported no revenue and total assets of $1.5 million for fiscal year ended December
31, 2003.
4. Safe Travel, Meridian, and InterCare, each, has at all relevant times been an issuer
as defined by the Sarbanes-Oxley Act of 2002 (the “Act”).
5. Smith audited Safe Travel’s 2003 financial statements included in Safe Travel’s
annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on May 6, 2004.
As part of that audit, Smith prepared and issued an audit report dated February 20, 2004 (the “Safe
Travel audit report”), which the company included in its 2003 Form 10-KSB. Smith audited
Meridian’s 2003 financial statements included in Meridian’s annual report for fiscal year 2003 on
Form 10-KSB, filed with the Commission on April 1, 2004. As part of that audit, Smith prepared
and issued an audit report dated March 31, 2004 (the “Meridian audit report”), which the company
included in its 2003 Form 10-KSB. Smith audited InterCare’s 2003 financial statements included
in InterCare’s annual report for fiscal year 2003 on Form 10-KSB, filed with the Commission on
March 31, 2004. As part of that audit, Smith prepared and issued an audit report, also dated March
31, 2004 (the “InterCare audit report”), which the company included in its 2003 Form 10-KSB.
Safe Travel, Meridian, and InterCare, collectively, paid Smith $9,500 for the audit work.4
6. At the time Smith prepared and issued the Safe Travel, Meridian, and InterCare
audit reports, he was not registered with the Public Company Accounting Oversight Board (the
“Board”), as required by Section 102(a) of the Act.
C. VIOLATIONS
1. Section 102(a) of the Act provides that “it shall be unlawful for any person that is
not a registered public accounting firm to prepare or issue, or to participate in the preparation or
issuance of, any audit report with respect to any issuer.”5
2. The provisions of Section 102(a) of the Act became effective on October 22, 2003.6
4 During the course of the Commission’s investigation, Smith voluntarily reimbursed Safe
Travel, Meridian, and InterCare the $9,500 in audit fees through the provision of non-audit or
other services to the issuers. In view of Smith’s reimbursement, the Commission is not ordering
disgorgement in this matter.
5 A violation of the Act or any rule that the Board issues under the Act is treated for all
purposes in the same manner as a violation of the Exchange Act, including with respect to
penalties. Sarbanes-Oxley Act of 2002, 15 U.S.C.A. § 7202(b)(1) (West 2002).
6 Section 102(a) became effective “[b]eginning 180 days after the date of the determination
of the Commission under Section 101(d)” of the Act that the Board was prepared to undertake its
statutory responsibilities. The Commission made the required determination on April 25, 2003.
3
3. Based on the conduct described above, Respondent willfully7 violated Section
102(a) of the Act.
D. FINDINGS
Based on the foregoing, the Commission finds that Smith willfully violated Section 102(a)
of the Sarbanes-Oxley Act of 2002.
E. UNDERTAKING
Respondent undertakes not to request, demand, or accept, directly or indirectly, any
compensation from Safe Travel, Meridian, and InterCare in connection with the audit work
associated with the audit reports for these companies. In determining whether to accept the Offer,
the Commission has considered this undertaking.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent’s Offer.
Accordingly, it is hereby ORDERED, effective immediately, that:
A. Smith shall cease and desist from committing or causing any violations and any
future violations of Section 102(a) of the Act.
B. Smith is censured.
C. Smith may practice before the Commission as an independent accountant provided
that:
1. The public accounting firm with which he is associated is registered with
the Board in accordance with the Act, and such registration continues to be effective; and
See Order Regarding Section 101(d) of the Sarbanes-Oxley Act of 2002, Securities Act Release
No. 8223, Exchange Act Release No. 47746, 2003 WL 1956164 (Apr. 25, 2003).
7 “Willfully” as used in this Offer means intentionally committing the act that constitutes
the violation. There is no requirement that the actor also be aware that he is violating a rule or
statute. See Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000); Tager v. SEC, 344 F.2d 5, 8
(2d Cir. 1965).
4
2. He has submitted to the Commission staff (attention: Office of the Chief
Accountant) the Board’s letter notifying the public accounting firm with which he is associated that
its registration application has been approved.
By the Commission.
Nancy M. Morris
Secretary
5
UNITED STATES OF AMERICA
In the Matter of
Andrew M. Smith, CPA,
Respondent.
ORDER INSTITUTING PUBLIC
IV.