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Gordon Jones: UNITED STATES OF AMERICA

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StockdungU   Monday, 12/19/11 02:28:26 PM
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Gordon Jones: UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 44265 / May 4, 2001

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1390 / May 4, 2001

ADMINISTRATIVE PROCEEDING
File No. 3-10210


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In the Matter of


R. GORDON JONES, CPA and
MARK F. JENSEN, CPA,

Respondents.




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OPINION AND ORDER
AGAINST R. GORDON JONES
PURSUANT TO RULE 102(e)
OF THE COMMISSION'S
RULES OF PRACTICE



I.

In connection with a public administrative proceeding instituted against him on May 25, 2000, R. Gordon Jones ("Jones") has submitted an Offer of Settlement that the Commission has determined to accept. Solely for the purpose of these proceedings, and without admitting or denying the allegations, facts, findings, or conclusions, herein, except the jurisdiction of the Commission over him and over the matters set forth herein, which he admits, Jones has consented to the entry of this Opinion and Order Against R. Gordon Jones Pursuant to Rule 102(e) of the Commission's Rules of Practice. 1

II.

On the basis of this Order and the Offer submitted by Jones, the Commission finds that: 2

Background

Dynamic American Corporation ("Dynamic") was at all relevant times a Utah corporation headquartered in Salt Lake City, Utah. Dynamic's common stock became registered with the Commission pursuant to Section 12(g) of the Exchange Act in March 1972. The Exchange Act registration of Dynamic's shares was revoked on November 1, 1999.

R. Gordon Jones is a CPA licensed in Utah and at all relevant times practiced through the Utah accounting firm of Jones, Jones & Co., LLC. He was the engagement partner in charge of the 1995 audit of Dynamic.

Background

Dynamic American Corporation ("Dynamic") was at all relevant times a Utah corporation headquartered in Salt Lake City, Utah. Dynamic's common stock became registered with the Commission pursuant to Section 12(g) of the Exchange Act in March 1972. The Exchange Act registration of Dynamic's shares was revoked on November 1, 1999.

R. Gordon Jones is a CPA licensed in Utah and Oklahoma and at all relevant times practiced through the Utah accounting firm of Jones, Jensen & Co., LLC. He was the engagement partner in charge of the 1995 audit of Dynamic.

Facts

Jones engaged in improper professional conduct in that he intentionally, knowingly or recklessly violated applicable professional standards in performing the audit of Dynamic's financial statements for the year ended September 30, 1995 and expressing an unqualified opinion concerning those financial statements. The audit was not conducted in accordance with GAAS and the financial statements were not prepared in conformity with GAAP. There was insufficient evidence for Jones to express an opinion concerning the financial statements as set forth below.

Dynamic's financial statements for the year ended September 30, 1995 were not prepared in conformity with GAAP in that Dynamic's balance sheet improperly listed as an asset certain Bolivian mining properties which were materially overvalued at $36,600,000, or 91% of Dynamic's total consolidated assets reported at December 31, 1995.

In fiscal 1995 Dynamic entered into a contract to acquire these properties in exchange for its Class A preferred stock. By the terms of the contract, this preferred stock was to have been converted to restricted common stock and transferred to the owner of the properties, Fernando Pero. However, the Class A preferred stock was not converted until after the 1995 fiscal year-end, and the restricted common stock was never issued to Pero. Thus, Dynamic should not have recorded the properties as an asset in fiscal 1995 or any other period because the conditions of the contract were never satisfied.

Because the common stock referenced above was restricted, its value was significantly less than the value Dynamic wished to record for the Bolivian properties on its balance sheet. Accordingly, after the fiscal 1995 year-end, Dynamic's board of directors authorized issuance of Class B preferred stock as supposed additional payment for its purchase of the properties. Dynamic then used the arbitrary redemption value of this Class B preferred stock to assign a significant value to the properties on its 1995 financial statements, which was an improper accounting treatment under GAAP.

In performing the audit of Dynamic's 1995 financial statements, Jones also did not act in accordance with GAAS in that he:

1) Failed to adequately plan the audit by not: (i) obtaining an appropriate level of knowledge of Dynamic's business, and (ii) developing appropriate audit programs.

2) Failed to obtain sufficient competent evidential matter concerning: (i) the valuation of the Bolivian mineral properties, and (ii) the professional reputation and independence of other auditors that performed audits of the Bolivian properties' financial statements before the properties were acquired by Dynamic.

3) Failed to maintain an attitude of professional skepticism by: (i) not responding to information suggesting that Dynamic's valuation of the Bolivian properties was inflated and that the acquisition of the properties was improperly recorded as a fiscal 1995 transaction, (ii) failing to question or adequately verify certain representations made by Dynamic's management; and (iii) failing to obtain a letter of representation from the other auditors of the Bolivian properties' financial statements.

4) Failed to exercise due professional care in the performance of the audit.

5) Failed to issue a properly worded audit report with respect to the work performed by other auditors.

6) Failed to obtain sufficient competent evidential matter to determine that a proper test had been done of the present value of certain "ore concentrates" valued at approximately $4.3 million.

III.

Based on the foregoing, the Commission finds it appropriate and in the public interest to accept the Offer of Jones and impose the sanctions consented to therein. Accordingly, IT IS HEREBY ORDERED that, effective immediately,

1. Jones is denied the privilege of appearing or practicing before the Commission as an accountant.

2. After 3 years from the effective date of this order, Jones may request that the Commission consider his reinstatement by submitting an application (attention: Office of the Chief Accountant) to resume appearing or practicing before the Commission as:

a) preparer or reviewer, or a person responsible for the preparation or review, of any public company's financial statements that are filed with the Commission. Such an application must satisfy the Commission that Jones's work in his practice before the Commission will be reviewed either by the independent audit committee of the public company for which he works or in some other acceptable manner, as long as he practices before the Commission in this capacity; and/or

b) an independent accountant. Such an application must satisfy the Commission that: (i) Jones, or the firm with which he is associated, is a member of the SEC Practice Section of the American Institute of Certified Public Accountants Division for CPA Firms ("SEC Practice Section"); (ii) Jones, or the firm, has received an unqualified report relating to his, or the firm's, most recent peer review conducted in accordance with the guidelines adopted by the SEC Practice Section; and (iii) As long as Jones appears or practices before the Commission as an independent accountant he will remain either a member of the SEC Practice Section or associated with a member firm of the SEC Practice Section, and will comply with all applicable SEC Practice Section requirements, including all requirements for periodic peer reviews, concurring partner reviews, and continuing professional education.

3. The Commission's review of an application by Jones to resume appearing or practicing before the Commission may include consideration of, in addition to the matters referenced above, any other matters relating to Jones's character, integrity, professional conduct, or qualifications to appear or practice before the Commission.

By the Commission.

Jonathan G. Katz
Secretary

Footnotes
1 Paragraph 1 of Rule 102(e) provides, in relevant part, that: The Commission may . . . deny, temporarily or permanently, the privilege of appearing or practicing before it in any way to any person who is found by the Commission after notice and opportunity for hearing in the matter: . . . (ii) [t]o be lacking in character or integrity or to have engaged in unethical or improper professional conduct; or (iii) [t]o have willfully violated, or willfully aided and abetted the violation of any provision of the Federal securities laws or the rules and regulations thereunder.

2 The findings herein are made pursuant to Jones's offer of settlement and are not binding on any other person or entity named as a respondent in this or any other proceedings.

http://www.sec.gov/litigation/admin/34-44265.htm



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