Florida CPA Accused of Faulty Audits of 8 Firms

The SEC says Terry Johnson's audits had so many deficiencies they "amounted to no audits at all."
Matthew HellerSeptember 18, 2015

A Florida-based CPA’s audits of eight publicly-traded companies were so deficient they amounted to “no audits at all,” the U.S. Securities and Exchange Commission has alleged.

The regulator on Thursday charged Terry L. Johnson, 56, with securities fraud, alleging numerous audit deficiencies including failing to obtain engagement quality reviews, properly plan audits, obtain sufficient appropriate audit evidence, and maintain audit documentation.

Johnson registered with the Public Company Accounting Oversight Board in December 2013. As part of a settlement of the SEC’s charges, he agreed to comply with an order suspending him from practicing before the commission, disgorge audit fees of $96,000, plus prejudgment interest, and pay a civil money penalty of $50,000.

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“Johnson’s audits were so deficient that they amounted to no audits at all and could not be relied upon as having afforded him with a reasonable basis for his opinions regarding the financial statements that he audited,” the SEC said in an administrative order.

After Johnson learned he was under investigation, the commission said, he created back-dated, phony work papers to create the false appearance of having proper documents.

According to the SEC, Johnson performed defective audits of ADM Endeavors, Boreal Water Collection, Legendary Ventures, Monster Arts, Primco Management, Puissant Industries, UMED Holdings, and Valley High Company.

The SEC said its investigation of Johnson revealed that Primco’s CFO was Stephen P. Corso, a convicted felon who had been barred in 2009 from practicing before the commission. In a separate proceeding, he agreed to comply with the 2009 order and pay $465,525 in disgorgement, plus $29,938 in prejudgment interest.

Most of Johnson’s clients, the SEC alleged, had previously been audited by an auditor who had been censured by the PCAOB. Once that auditor’s registration was revoked, Johnson took over the accounts.

“Johnson’s audits provided investors with the false impression that his audits of multiple issuers comported with professional auditing standards,” said Michael Maloney, chief accountant of the SEC’s Enforcement Division. “Today’s order reinforces that we will continue to root out and hold accountable auditors who put investors at risk by their failure to comply with professional auditing standards.”