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Two CPAs Draw SEC Ban, Firm Censured

Steve DohanTwo Florida CPAs, one a former member of the Florida State Board of Accountancy, have been suspended from practice before the SEC and the firm that both had been associated with was censured for their role in the 2007 audit of the financial statements of a company that recorded the sales of millions of dollars of skin care products that sat unsold in its warehouse. The SEC suspended Steven H. Dohan, managing director of Dohan + Co. and Nancy Brown, a CPA who was a director at the firm at the time.

Dohan, formerly a member of the Florida board, operates the firm Dohan Salum + Company for tax and business consulting services. Dohan + Co. provides services to publicly held companies. His firm's website says Dohan served on the Florida board's Probable Cause Panel from 1985 to 1986 and was a board investigator from 1986 through 1990. Dohan is also a former AICPA appointed peer reviewer and practice management reviewer. Brown is now owner of NL Brown CPA which began operating in August 2009.

At issue was the 2007 audit involving International Commercial Television, a company based in Nevada, whose best known skin care product is Derma Wand which is promoted as a skin care appliance that purportedly "reduces fine lines and wrinkles and improves overall skin appearance." ICTV sold products through distributors such as the Home Shopping Network through drop-ship contracts.

Under the contract, ICTV retained ownership of all products until they were sold by HSN, which also had the right to return them until 60 days after delivery to its customers. ICTV improperly booked $2.8 million in sales to HSN. When revenue recognition problems were corrected and results restated, about $1.9 million in net income for fiscal 2007 and the first two quarters of 2008 turned into losses of more than $2 million. The SEC blamed Karl Redekopp, former CFO of ICTV, for the problems.

Dohan contracted with another firm to product an audit manager and much of the work was performed by another accountant under Erez Bahar CA as audit manager. Brown served as engagement partner and Dohan as concurring partner. Dohan failed to flag the revenue recognition questions. After ICTV hired another firm in September 2009, that organization questioned the procedures and the results were restated. Dohan + Co. had already been notified by the Public Company Accounting Oversight Board of audit deficiencies.

The SEC found Brown was unaware of GAAP guidance on the revenue recognition issues and that while Dohan was, he failed to research the questions involved. They didn't ask for a copy of the ICTV contract with HSN nor did they acquire and examine any other documentation about its terms. They did not send out accounts receivable conformation and Brown didn't visit the office of ICTV or the other accounting firm.

Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
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