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| UNITED STATES OF AMERICA |
| Before the |
| SECURITIES AND EXCHANGE COMMISSION |
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| SECURITIES EXCHANGE ACT OF 1934 |
| Release No. 66269 / January 30, 2012 |
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| ACCOUNTING AND AUDITING ENFORCEMENT |
| Release No. 3359 / January 30, 2012 |
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| ADMINISTRATIVE PROCEEDING |
| File No. 3-14724 |
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| In the Matter of |
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| CHRISTOPHER J. KELLY, |
| ACA |
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| and |
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| MARGARET HEBB, ACA |
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| Respondents. |
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| ORDER INSTITUTING PUBLIC |
| ADMINISTRATIVE PROCEEDINGS |
| PURSUANT TO SECTION 4C OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
| AND RULE 102(e) OF THE |
| COMMISSION’S RULES OF PRACTICE, |
| MAKING FINDINGS, AND IMPOSING |
| REMEDIAL SANCTIONS |
| |
| I. |
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| The Securities and Exchange Commission (“Commission”) deems it appropriate that public |
| administrative proceedings be, and hereby are, instituted against Christopher J. Kelly, ACA |
| (“Kelly”) and Margaret Hebb, ACA (“Hebb”) (collectively the “Respondents”) pursuant to Section |
| 4C |
| 1 of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(ii) of the |
| Commission’s Rules of Practice.2 |
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| 1 Section 4C provides, in relevant part, that: |
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| The Commission may censure any person, or deny, temporarily or permanently, to any person the privilege |
| of appearing or practicing before the Commission in any way, if that person is found . . . (1) not to possess |
| the requisite qualifications to represent others . . . (2) to be lacking in character or integrity, or to have |
| engaged in unethical or improper professional conduct; or (3) to have willfully violated, or willfully aided |
| and abetted the violation of, any provision of the securities laws or the rules and regulations thereunder. |
| 2 |
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| II. |
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| In anticipation of the institution of these proceedings, each Respondent has submitted an |
| Offer of Settlement (“Offers”) which the Commission has determined to accept. Solely for the |
| purpose of these proceedings and any other proceedings brought by or on behalf of the |
| Commission, or to which the Commission is a party, and without admitting or denying the findings |
| herein, except as to the Commission’s jurisdiction over them and the subject matter of these |
| proceedings, which are admitted, Respondents consent to the entry of this Order Instituting Public |
| Administrative Proceedings Pursuant to Section 4C of the Securities Exchange Act of 1934 and |
| Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial |
| Sanctions (“Order”), as set forth below. |
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| III. |
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| On the basis of this Order and Respondents’ Offers, the Commission finds |
| 3 |
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| that: |
| A. SUMMARY |
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| 1. These proceedings arise out of the Respondents’ improper professional conduct |
| during audits of the 2004, 2005 and 2006 financial statements of Symmetry Medical Sheffield LTD, |
| f/k/a Thornton Precision Components, Limited (“TPC”). TPC has, since 2003, been a wholly |
| owned U.K. subsidiary of Symmetry Medical, Inc. (“Symmetry”). Since December 2004, |
| Symmetry has been an NYSE listed company. TPC’s financial data has at all relevant times been |
| included in Symmetry’s consolidated financial statements filed with the Commission as part of |
| Symmetry’s quarterly 10-Q and annual 10-K filings. From 1999 through late September 2007, |
| TPC’s management was engaged in a scheme to improperly boost TPC’s revenues, net income and |
| other performance indicators by fraudulently manipulating TPC’s financial accounts. TPC booked |
| fictitious sales revenues, understated costs of goods sold, created fictitious inventories, improperly |
| capitalized certain tool and die to reduce expenses, and engaged in other accounting manipulations, |
| resulting in material overstatements of net income and material misstatements of other financial line |
| items in Symmetry’s financial statements. |
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| 2. Since 2003, Ernst & Young, LLP (“E&YUS”) has served as Symmetry’s |
| independent auditor. In connection with its 2004-6 audits of Symmetry’s consolidated financial |
| statements, E&YUS engaged Ernst & Young LLP UK (“E&YUK”) to audit the financial statements |
| |
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| 2 Rule 102(e)(1)(ii) provides, in pertinent part, that: |
| |
| The Commission may . . . deny, temporarily or permanently, the privilege of appearing or |
| practicing before it . . . to any person who is found . . . to have engaged in unethical or improper |
| professional conduct. |
| |
| 3 The findings herein are made pursuant to Respondents’ Offers of Settlement and are not binding on any other |
| person or entity in this or any other proceeding. |
| 3 |
| of TPC. Respondent Kelly served as the audit partner on E&YUK’s 2004-6 TPC audits, while |
| respondent Hebb was the audit manager on the 2005 and 2006 audits. |
| |
| 3. Respondents’ audits failed to comply with numerous Public Company Accounting |
| Oversight Board (“PCAOB”) auditing standards. Respondents failed to obtain sufficient competent |
| evidential matter, failed to exercise due professional care in the planning and performance of their |
| audits, and failed to properly supervise the audits. The fraud at TPC was not uncovered and |
| E&YUK issued unqualified audit opinions on TPC’s 2004-6 financial statements. E&YUS, in turn, |
| issued unqualified audit reports for Symmetry’s 2004-6 Form 10-K filings that incorrectly stated |
| that Symmetry’s financial statements were fairly reported in conformity with Generally Accepted |
| Accounting Principles (“GAAP”). Respondents’ conduct, as further described below, constituted |
| improper professional conduct within the meaning of Rule 102(e)(1)(ii) and (iv) and Section 4C of |
| the Exchange Act. |
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| B. RESPONDENTS |
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| 4. Christopher J. Kelly, ACA, age 49, is a citizen of the United Kingdom. In 1987, |
| Kelly became a member of the Institute of Chartered Accountants of England and Wales |
| (“ICAEW”), a professional credential corresponding to that of certified public accountant in the |
| United States. |
| 4 |
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| Kelly was employed with E&YUK from 1984 to 2009 and served as the audit |
| partner on the TPC audit engagement from 2003 until the Fall of 2007. |
| 5. Margaret Hebb, née Whyte, ACA, age 50, is a citizen of the United Kingdom. |
| Hebb became a member of the ICAEW in 1994. Hebb served as the senior manager on the TPC |
| audit engagement for the 2005 and 2006 audits. |
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| C. OTHER RELEVANT PARTIES |
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| 6. Symmetry Medical, Inc. (“Symmetry”), is a Delaware corporation founded in |
| 1976 with its headquarters in Warsaw, Indiana. Symmetry manufactures medical implants and |
| instruments and also manufactures specialized products for the aerospace industry. Symmetry |
| operates facilities in the United States, the United Kingdom, France, Ireland and Malaysia. |
| Symmetry completed its initial public offering in December 2004. At all relevant times, |
| Symmetry’s common stock has been registered with the Commission pursuant to Section 12(b) of |
| the Exchange Act and has been listed on the New York Stock Exchange. |
| |
| 7. Symmetry Medical Sheffield LTD, f/k/a Thornton Precision Components, |
| Limited (“TPC”) is a UK limited liability company wholly owned by Symmetry and located in |
| Sheffield, UK. Symmetry acquired TPC in June 2003. TPC manufactures forged, cast, and |
| machined implants for the global orthopedic device and aerospace markets. TPC’s financial data |
| has at all relevant times been included in Symmetry’s consolidated financial statements filed |
| with the Commission as part of Symmetry’s quarterly 10-Q and annual 10-K filings. |
| |
| 4 The designations “ACA” (for Associate Chartered Accountant) and FCA (for Fellow Chartered Accountant) are |
| used in the United Kingdom and are analogous to the CPA designation in the United States. |
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| 4 |
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| 8. Ernst & Young, LLP (“E&YUS”) is a national public accounting firm |
| headquartered in New York City, with offices located throughout the United States. At all relevant |
| times, E&Y has provided auditing, consulting, and tax services to a variety of companies, |
| including companies whose securities are registered with the Commission. E&YUS has served as |
| Symmetry’s external auditor since June 2003. |
| |
| 9. Ernst & Young LLP UK (“E&YUK”) is an Ernst & Young “member firm” |
| providing accounting and auditing services in the United Kingdom. E&YUK has audited TPC’s |
| financial accounts since June 2003. E&YUK is registered with the PCAOB and was required to |
| register with the PCAOB in order to participate—through its audit of TPC—in E&YUS’s audit |
| of Symmetry. |
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| D. FACTS |
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| The Fraud at TPC |
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| 10. From 1999 through late September 2007, TPC was engaged in a scheme to |
| improperly boost TPC’s revenues, net income and other performance indicators by fraudulently |
| manipulating TPC’s financial accounts. TPC booked fictitious sales revenues, understated costs of |
| goods sold, created fictitious inventories, improperly capitalized certain tool and die to reduce |
| expenses, and engaged in other accounting manipulations, resulting in material overstatements of |
| net income and material misstatements of other financial line items in Symmetry’s financial |
| statements. |
| |
| Fictitious Sales Revenues |
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| 11. TPC booked fictitious sales revenues in an effort to make up shortfalls to its |
| monthly and quarterly sales revenues targets. TPC recorded the fictitious sales by making top-side |
| journal entries to sales and accounts receivable. When TPC needed additional sales to meet its |
| monthly target, for example, its practice was to book a top-side sales entry to meet that target. |
| |
| 12. TPC’s booking of fictitious sales revenues had a significant impact on TPC’s |
| accounts receivable (“AR”) balances. For example, for fiscal year 2005, TPC’s reported AR was |
| £10,717,000, but of that amount, at least £4,122,000, or roughly 38%, was fictitious. For fiscal |
| year 2006, TPC’s reported AR was £12,440,000 but of that amount, at least £6,031,000, or roughly |
| 48%, was fictitious. |
| |
| Understatement of Cost of Revenues and Manipulation of Inventories |
| |
| 13. In an effort to boost TPC’s profits artificially , TPC intentionally understated cost |
| of revenues. Rather than report the actual costs of inventory sold, TPC’s accounting group made |
| journal entries reducing expense and increasing inventory balances. As a result of these |
| manipulations, TPC’s balance sheet overstated inventory. |
| |
| 5 |
| 14. In order to conceal their manipulation of costs and inventory, TPC’s accounting |
| staff falsified their detailed inventory ledger, which was prepared after every physical inventory |
| count. TPC added fictitious work in process (WIP) inventory to the listing to make it appear that |
| TPC’s inventory subledger reconciled to the general ledger and balance sheet. |
| |
| 15. TPC’s manipulation of cost of revenues and inventories had a signific ant impact |
| on TPC’s financial statements. For example, for fiscal year 2005, TPC reported inventories |
| valued at £9,753,000. In reality, only £3,531,000, or 36%, of that inventory actually existed. |
| That same year, TPC underreported its cost of revenues by £2,505,000, thus increasing gross |
| profit by the same amount. For fiscal year 2006, TPC reported inventory valued at £10,973,000. |
| In reality, only £3,692,000, or 33%, of that inventory actually existed. For the same period, TPC |
| under-reported costs of goods sold by £1,058,000, thus increasing TPC’s gross profit by the |
| same amount. |
| 5 |
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| Symmetry’s 2008 Restatement |
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| 16. The fraud at TPC was not discovered until September 2007, when an employee of |
| TPC came forward and confessed the fraud to Symmetry’s CEO. |
| |
| 17. On April 23, 2008, after completing an internal investigation into the accounting |
| irregularities at TPC, Symmetry filed a Form 10-K Annual Report for the fiscal year ended |
| December 29, 2007 and amended Quarterly Reports on Form 10-Q/A for the first and second |
| quarters of fiscal 2007, collectively reflecting the restatement of: (i) Symmetry’s previously issued |
| consolidated financial statements for the 2005 and 2006 fiscal years and the first and second |
| quarters of fiscal 2007; (ii) selected financial data for the 2003, 2004, 2005 and 2006 fiscal years; |
| and (iii) Management’s Discussion and Analysis, based on the restated annual and quarterly |
| financial information. |
| According to Symmetry, the restatement was necessitated by the accounting |
| irregularities at TPC. |
| |
| 18. The restatement negatively impacted Symmetry’s previously reported financial |
| results for fiscal years 2003 through the second quarter of 2007. The chart below shows that the |
| errors were material to Symmetry’s 2004-6 financial statements: |
| |
| Fiscal Year Reported Net |
| Income |
| Restated Net |
| Income |
| Difference Overstatement |
| 2004 $11.7 million $8.4 million -$3.3 million -39% |
| 2005 $31.8 million -$9.9. million -$41.7 million6 -421% |
| 2006 $24.1 million $18.5 million -$5.6 million -30% |
| |
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| 5 TPC engaged in a number of other improper and fraudulent accounting manipulations in an effort to meet its |
| monthly performance targets. These techniques included improper tool and die capitalization and manipulation of |
| its accounts payable. |
| |
| 6 $33.6 million of the reduction in earnings for FY 2005 resulted from the write down of goodwill associated with |
| Symmetry’s acquisition of TPC. |
| 6 |
| 19. In the seven months between the close of trading on October 4, 2007, after which |
| Symmetry made its first disclosure concerning accounting irregularities at TPC, and the close of |
| trading on April 25, 2008, the day after Symmetry filed its restatement, Symmetry’s stock price fell |
| more than 26%, from $17.74 per share to $13.05 per share. |
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| E&YUK’s Deficient TPC Audits |
| |
| Background |
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| 20. E&YUS audited Symmetry’s consolidated financial statements for fiscal years |
| 2004-6. In connection with its Symmetry audits, E&YUS engaged E&YUK to audit TPC’s |
| financial accounts. E&YUK’s audits were to be conducted in accordance with PCAOB auditing |
| standards, and TPC’s financial reporting packages were to be prepared in compliance with US |
| GAAP. E&YUS relied on the results of E&YUK’s audits to issue its unqualified audit reports for |
| Symmetry’s Form 10-K filings for fiscal years 2004-6. |
| |
| 21. Respondent Kelly was the E&YUK engagement partner on TPC’s 2004-6 year-end |
| audits. Respondent Hebb was the E&YUK audit manager on the 2005 and 2006 audit |
| engagements. |
| 7 |
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| The following deficiencies were common to the 2004-6 fiscal year audits. |
| E&YUK Failed to Properly Audit TPC’s Accounts Receivable Balances |
| |
| 22. E&YUK failed to reconcile TPC’s accounts receivable general ledger account to a |
| detailed accounts receivable subsidiary ledger. See AU § 326.19. E&YUK was told by TPC that |
| this detailed ledger was unavailable, but did not adequately question this assertion. Instead, |
| E&YUK reconciled the general ledger account to a summary listing of aged debt by customer. |
| Had E&YUK reconciled to TPC’s detailed ledger, they would have seen that the general ledger |
| balance, inflated due to premature and fictitious revenue recognition, was far greater than the |
| subsidiary ledger balance. |
| |
| 23. E&YUK failed to properly confirm accounts receivable. For fiscal year 2004 |
| E&YUK relied entirely on alternative procedures, and was able to validate only 7% of its sample |
| through that testing. E&YUK supplemented this by checks to delivery notes, but its work papers |
| do not clearly document whether this covered the entire sample or only part thereof. For the |
| fiscal year 2005 audit, 59% of the confirmation sample value was never validated through |
| confirmations or alternative procedures. For the fiscal year 2006 audit, 26% of the sample was |
| never validated. |
| |
| 24. E&YUK failed to properly document in its work papers, and in its Summary |
| Review Memoranda (“SRM”) submitted to E&YUS, the results of its AR testing. With respect |
| to the 2005 audit, E&YUK’s SRM contains no discussion of its confirmation of receivables, |
| notwithstanding the fact that E&YUK had been unable to confirm roughly 60% of items tested. |
| |
| |
| 7 Hebb did not work on the 2004 audit engagement, although she had access to the 2004 work papers in connection |
| with her work on the 2005 and 2006 audit engagements. |
| 7 |
| E&YUK did not adequately review TPC’s journal entries |
| |
| 25. During fiscal years 2004-6, TPC booked fictitious revenues via monthly top- side |
| journal entries. Any top-side journal entry to sales should have been a red flag to the the audit |
| teams under Respondents’ supervision requiring further investigation. See AU §§ 316.58-62. |
| Notwithstanding purported documentation in E&YUK’s work papers that they had reviewed and |
| agreed to supporting documentation all “non-standard or significant” journal entries, E&YUK |
| failed to detect and investigate TPC’s monthly top-side journal entries to revenue. |
| E&YUK failed to properly audit TPC’s inventories |
| |
| 26. In order to conceal TPC’s manipulation of costs of revenues, TPC added fictitious |
| WIP inventory to TPC’s inventory ledger. E&YUK failed to detect this manipulation in their |
| audits of TPC’s inventories. While E&YUK staff did attend and observe the year-end physical |
| inventory counts at TPC, they failed to perform the crucial audit procedure of ensuring control over |
| inventory tags. Before leaving the count, the audit teams should have obtained a complete list of |
| all inventory tags issued in the count, or, alternatively, copies of all of the tag books created as part |
| of the physical inventories. See AU §§ 331 and 316.54. In each of the audit years in question, the |
| audit teams either failed to do this or failed to properly document that it was done. |
| |
| 27. Therefore, when E&YUK’s audit team reviewed TPC’s final inventory listing |
| during the year-end audit, they did not determine that fictitious items had been added. The |
| significance of E&YUK’s failure to properly audit inventories can be seen when TPC’s reported |
| inventories for 2004-6 are compared to its restated inventories for the same time period. |
| |
| FY REPORTED |
| INVENTORY |
| RESTATED |
| INVENTORY |
| Percentage of |
| Reported Inventory |
| that actually |
| existed |
| 2004 £6,968,000 £3,250,000 47% |
| 2005 £9,753,000 £3,531,000 36% |
| 2006 £10,973,000 £3,692,000 34% |
| |
| Respondents’ Improper Professional Conduct |
| |
| 28. The “applicable professional standards” for accountants practicing before the |
| Commission include the PCAOB auditing standards. |
| |
| 29. PCAOB auditing standards require that the auditor be proficient in accounting |
| matters and that the “auditor with final responsibility for the engagement should know, at a |
| minimum, the relevant professional accounting and auditing standards and should be |
| knowledgeable about the client.” AU §230.06, Due Professional Care in the Performance of |
| Work; see also AU § 210, Training and Proficiency of the Auditor. AU Section 230 also |
| requires an auditor to exercise due professional care and professional skepticism, which includes |
| demonstrating a questioning mind and a critical assessment of audit evidence. |
| 8 |
| |
| 30. PCAOB auditing standards require that “ sufficient competent evidential |
| matter…be obtained through inspection, observation, inquiries, and confirmations to afford a |
| reasonable basis for an opinion regarding the financial statements under audit. AU § 326.01 |
| Evidential Matter. |
| |
| 31. Auditors must adequately plan, staff and supervise the audit. See AU § 150.02, |
| Generally Accepted Auditing Standards; 230.06; AU § 311.01 et seq., Planning and Supervision; |
| 311.11 et seq. |
| |
| 32. Further, AU § 316, Consideration of Fraud in a Financial Statement Audit , |
| requires the auditor to assess the risks of material misstatement due to fraud and to presume that |
| revenue recognition is a fraud risk. |
| 33. Kelly, as the engagement partner, had overall responsibility for the audit |
| engagements to ensure that E&YUK’s audits of TPC were conducted in accordance with PCAOB |
| auditing standards, including planning and supervising the audit and the review of field work. AU § |
| 311. During the 2004-6 TPC audits, Kelly unreasonably departed from the PCAOB auditing |
| standards in the manner further described below. |
| |
| 34. Hebb, as the audit manager on the 2005 and 2006 engagements, was responsible for |
| supervising and reviewing documentation of field work performed. During the 2005-6 TPC audits, |
| Hebb unreasonably departed from the PCAOB auditing standards in the manner further described |
| below. |
| |
| 35. Respondents (and the audit teams under their supervision) failed to obtain sufficient |
| competent evidential matter in connection with their audits of TPC’s accounts receivable. |
| Respondents failed to properly evaluate the results of their confirmation procedures and did not |
| consider whether the unexamined items could be misstatements and the impact of such potential |
| misstatements on the accounts receivable balance. The non-validated sample balances were |
| material to TPC’s financial statements and exceeded the tolerable error assigned to the TPC audit |
| by E&YUS. |
| |
| 36. Respondents failed to evaluate the implications, both quantitative and qualitative, |
| of their inability to validate selected receivables. They did not consider whether the reasons for |
| this inability necessitated a change in assessed risks or a reevaluation of the degree of reliance on |
| management representations. AU §§ 316.68, 316.74, and 350.25. |
| 37. The following chart reflects the extent to which E&YUK failed to substantiate the |
| existence of receivables reported by TPC in fiscal years 2004-6, but nonetheless issued unqualified |
| audit opinions. |
| |
| 9 |
| FY Reported AR |
| Balance (as of |
| date of testing) |
| Sample Balance |
| Tested |
| % of Sample |
| Balance |
| Validated by |
| E&YUK |
| Value of non- |
| validated |
| sample balance |
| 2004 £9,136,248 £3,671,012 7%8 £3,420,265 |
| 2005 £11,195,346 £5,689,114 41% £3,354,692 |
| 2006 £11,553,278 £9,095,968 74% £2,357,305 |
| |
| 38. Respondents and the audit teams under their supervision failed to properly |
| document in E&YUK’s work papers, and in their Summary Review Memoranda (SRM) |
| submitted to E&YUS, the results of E&YUK’s AR testing. With respect to the 2005 audit, |
| E&YUK’s SRM contains no discussion of its confirmation of receivables, notwithstanding the |
| fact that E&YUK had been unable to confirm roughly 60% of the items tested. |
| |
| 39. Respondents failed to adequately plan, staff and supervise the audits. As a result, |
| E&YUK failed to properly review TPC’s journal entries and, accordingly, failed to detect and |
| investigate TPC’s fictitious top-side journal entries designed to inflate revenue. Likewise, |
| because Respondents failed to adequately plan, staff and supervise the inventory audits, E&YUK |
| failed to detect TPC’s manipulation of its inventories. |
| |
| E. VIOLATIONS |
| |
| 40. Rule 102(e)(1)(ii) of the Commission’s Rules of Practice and Section 4C of the |
| Exchange Act authorize the Commission to censure or deny, temporarily or permanently, the |
| privilege of appearing or practicing before the Commission to accountants who are found to have |
| engaged in improper professional conduct. Such improper professional conduct includes |
| “repeated instances of unreasonable conduct, each resulting in a violation of applicable |
| professional standards, that indicate a lack of competence to practice before the Commission.” |
| Rule 102(e)(1)(iv)(B)(2). |
| 41. Respondents’ actions during the engagements were unreasonable, failed to conform |
| to applicable professional standards and indicate a lack of competence to practice before the |
| Commission. Respondents failed: (i) to obtain sufficient competent evidential matter in violation |
| of AU § 326; (ii) to exercise due professional care in the planning and performance of the audit in |
| violation of AU §§ 230 and 316; (iii) to adhere to the standards for conducting and evaluating the |
| results of accounts receivable confirmation procedures in violation of AU §§ 330 and 350; (iv) to |
| adhere to standards for observation and testing of physical inventory counts in violation of AU §§ |
| 331 and 316.54; (v) adequately to test journal entries for evidence of possible material |
| misstatement due to fraud in violation of AU § 316.58-62; and (vi) properly to plan and supervise |
| the audit in violation of AU § 311. |
| |
| |
| |
| 8 As noted in ¶ 23 above, E&YUK supplemented its 2004 AR testing by checks to delivery notes, but its work |
| papers do not clearly document whether this supplemental testing covered the entire sample or only a part thereof. |
| 10 |
| F. FINDINGS |
| |
| 42. As a result of the conduct describe above, the Commission finds that Respondents |
| Kelly and Hebb engaged in improper professional conduct pursuant to Rules 102(e)(1)(ii) and |
| 102(e)(1)(iv)(B)(2) of the Commission’s Rules of Practice and Section 4C of the Exchange Act. |
| IV. |
| |
| In view of the foregoing, the Commission deems it appropriate to impose the sanctions |
| agreed to in Respondents’ Offers. |
| |
| Accordingly, it is hereby ORDERED, effective immediately, that: |
| |
| A. Kelly is denied the privilege of appearing or practicing before the Commission as |
| an accountant. |
| B. After two years from the date of this order, Kelly 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: |
| |
| 1. 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 Respondent’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 |
| |
| 2. an independent accountant. Such an application must satisfy the |
| Commission that: |
| |
| (a) Kelly, or the public accounting firm with which he is associated, is |
| registered with the Public Company Accounting Oversight Board (“Board”) in accordance with |
| the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; |
| |
| (b) Kelly, or the registered public accounting firm with which he is |
| associated, has been inspected by the Board or equivalent U.K. organization and that inspection |
| did not identify any criticisms of or potential defects in the respondent’s or the firm’s quality |
| control system that would indicate that the Respondent will not receive appropriate supervision; |
| (c) Kelly has resolved any disciplinary issues with the Board or |
| equivalent UK organization, and has complied with all terms and conditions of any sanctions |
| imposed by the Board or equivalent U.K. organization (other than reinstatement by the |
| Commission); and |
| |
| (d) Kelly acknowledges his responsibility, as long as Kelly appears or |
| practices before the Commission as an independent accountant, to comply with all requirements |
| 11 |
| of the Commission and the Board, including, but not limited to, all requirements relating to |
| registration, inspections, concurring partner reviews and quality control standards. |
| |
| C. The Commission will consider an application by Kelly to resume appearing or |
| practicing before the Commission provided that his chartered accountant license is current and he |
| has resolved any disciplinary issues with the ICAEW. However, if licensure is dependent on |
| reinstatement by the Commission, the Commission will consider an application on its other |
| merits. The Commission’s review may include consideration of, in addition to the matters |
| referenced above, any other matters relating to Kelly’s character, integrity, professional conduct, |
| or qualifications to appear or practice before the Commission. |
| |
| D. Hebb is denied the privilege of appearing or practicing before the Commission as |
| an accountant. |
| E. After two years from the date of this order, Hebb may request that the |
| Commission consider her reinstatement by submitting an application (attention: Office of the |
| Chief Accountant) to resume appearing or practicing before the Commission as: |
| |
| 1. 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 Hebb’s work in her practice before the |
| Commission will be reviewed either by the independent audit committee of the public company |
| for which she works or in some other acceptable manner, as long as she practices before the |
| Commission in this capacity; and/or |
| |
| 2. an independent accountant. Such an application must satisfy the |
| Commission that: |
| |
| (a) Hebb, or the public accounting firm with which she is associated, |
| is registered with the Public Company Accounting Oversight Board (“Board”) in accordance |
| with the Sarbanes-Oxley Act of 2002, and such registration continues to be effective; |
| |
| (b) Hebb, or the registered public account ing firm with which she is |
| associated, has been inspected by the Board or equivalent U.K. organization and that inspection |
| did not identify any criticisms of or potential defects in the respondent’s or the firm’s quality |
| control system that would indicate that the Respondent will not receive appropriate supervision; |
| (c) Hebb has resolved any disciplinary issues with the Board or |
| equivalent UK organization, and has complied with all terms and conditions of any sanctions |
| imposed by the Board or equivalent U.K. organization (other than reinstatement by the |
| Commission); and |
| |
| (d) Hebb acknowledges her responsibility, as long as Hebb appears or |
| practices before the Commission as an independent accountant, to comply with all requirements |
| 12 |
| of the Commission and the Board, including, but not limited to, all requirements relating to |
| registration, inspections, concurring partner reviews and quality control standards. |
| |
| F. The Commission will consider an application by Hebb to resume appearing or |
| practicing before the Commission provided that her chartered accountant license is current and she |
| has resolved any disciplinary issues with the ICAEW. However, if licensure is dependent on |
| reinstatement by the Commission, the Commission will consider an application on its other |
| merits. The Commission’s review may include consideration of, in addition to the matters |
| referenced above, any other matters relating to Hebb’s character, integrity, professional conduct, |
| or qualifications to appear or practice before the Commission. |
| |
| By the Commission. |
| |
| |
| |
| Elizabeth M. Murphy |
| Secretary |
