Washington (July 15, 2004) -- A Denver-based accounting firm agreed to be barred from practicing before the Securities and Exchange Commission for three years and to pay a $50,000 civil penalty to settle charges brought by the commission that it violated securities laws in its audits of a former client.

In addition to the three-year ban and the fine, Denver-based CPA firm Levine, Hughes & Mithuen Inc. agreed to cease and desist from committing or causing any securities laws violations, and to establish and maintain policies and procedures to preserve working papers intact and to certify within three months that such policies and procedures have been established and implemented. The firm, which did not admit or deny the SEC’s allegations, also agreed to hire an independent consultant to confirm that it disseminated those policies and procedures firm-wide and to conduct a review of a one-year period of LHM's compliance with those policies and procedures and report to the SEC the results of the review.

The SEC alleged that LHM caused Sport-Haley to violate securities laws by causing the company to file quarterly and annual reports for fiscal 1998 and 1999 that were materially misstated and that misrepresented the company’s financial condition.

The SEC’s complaint, filed in Colorado district court, alleged that LHM, former auditor of Sport-Haley Inc., in its audits of the company’s 1998 and 1999 financial statements, issued audit reports containing unqualified opinions even though the firm knew or was reckless in not knowing that the financial statements materially misstated work-in-process inventory, improperly capitalized period costs, and materially misstated losses on the sale of headwear equipment.

The commission also alleged that, after LHM learned of the investigation of Sport-Haley and received requests from the SEC for documents relating to its audit, LHM personnel added information to the audit workpapers, improperly altered some of the original audit workpapers, disposed of some Sport-Haley documents in LHM's office, and destroyed review notes that had been created as part of its review of past Sport-Haley audits.

According to the SEC, LHM served as Sport-Haley’s auditor from 1992 until the company dismissed the firm in July 2000.

-- WebCPA staff

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