A Canadian accountant has been barred from practicing before the SEC for two years after the SEC rejected his contentions he was not acting as an auditor. Assurance partner The SEC concluded a major problem was the failure to conduct a walk-through of the revenue stream or sales cycle of the International Commercial Television; Home Shopping Network, its major customer, and Christopher Morgan, which operates a fulfillment center. Concerning the audit of the 2007 ICTV financial results, administrative law judge, Carol Fox Foelak, held that "had a walk-through been conducted, the accountants would have discovered that revenues were overstated."
The issues regarding the ICTV audits had already brought three-year suspensions each to Stephen H. Dohan of Dohan & Co. and Nancy L. Brown, a CPA who formerly worked at Dohan & Co. Dohan and Brown were barred for three years and the firm censured. Dohan is managing director of Dohan + Co., while Brown, now owner of NL Brown CPA, was as a director at the time.
The best-known product of ICTV is Derma Wand which is promoted as a skin care appliance. Bahar was audit manager. Brown served as engagement partner and Dohan as concurring partner ICTV sold products through distributors such as the HSN through drop-ship contracts. Until all products were sold, ICTV retained ownership with customers having the right to return them until 60 days after delivery. ICTV improperly booked $2.8 million in sales to HSN. The SEC blamed Karl Redekopp, former CFO of ICTV, for those problems.
During the 2007 audit, Michael Winstanley, another Davidson accountant, was a senior who performed fieldwork under Bahar's supervision. Fox wrote that Winstanley did not perform a walk-through of any of the parties and that Bahara seemed to still not understand how the ICTV product distribution system worked.
Bahar failed to require Winstanley obtain and review the HSN agreements that had resulted in a 280-percent increase in revenue, the judge held. She also reported that Bahar "failed to identify and follow up on red flags contained in workpapers he reviewed, none more obvious to a reasonable accountant than the fact that HSN's obligation to pay for the DermaWands was contingent upon HSN's sale through to the end customer."
