SEC.gov | Cypress Bioscience Inc. and Alex P. De Soto
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Cypress Bioscience Inc. and Alex P. De Soto
Cypress Bioscience Inc. and Alex P. De Soto
SECURITIES EXCHANGE ACT OF 1934
Release No. 42438 / February 18, 2000
ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1232 / February 18, 2000
ADMINISTRATIVE PROCEEDING File No. 3-9085
______________________________
:
In the Matter of :
Alex. P. de Soto, CPA : ORDER GRANTING APPLICATION FOR
: REINSTATEMENT TO PRACTICE AS AN
: ACCOUNTANT
______________________________ :
On September 19, 1996, Alex P. de Soto, CPA ("de Soto") was suspended by the Commission from appearing or practicing as an accountant before the Commission as a result of settled public administrative proceedings instituted by the Commission against de Soto pursuant to Section 8A of the Securities Act, Section 21C of the Exchange Act and Rule 102(e)(1)(iii) of the Commission's Rules of Practice. 1 This order is issued in response to his application for reinstatement to practice before the Commission as an accountant.
For its third quarter ended September 30, 1993, Cypress Bioscience Inc., formerly known as IMRE Corporation ("Cypress" or the "Company"), filed with the Commission financial statements that included material revenues from transactions with customers under the Company's volume discount program. During the summer of 1993, an accountant for Cypress informed de Soto, who at the time was an audit manager for Coopers & Lybrand LLP working on the Cypress account, of the Company's intent to increase its volume discount program revenue to a material amount, and sought de Soto's advice as to whether unshipped, invoiced products related to this program could be recognized as revenue. De Soto referred the Cypress accountant to the requirements of AAER No. 108 related to bill and hold transactions, and informed the accountant that the Company would have to obtain a legal opinion that the storage sales constituted legal sales in the state of Washington.
In mid-1993, de Soto sought the position of Cypress' chief financial officer, and was hired and began working as such on September 1, 1993. De Soto immediately set out to acquaint himself with Cypress' volume discount program. Based on his review of the relevant documentation and after obtaining additional relevant information related to the volume discount program, he concluded that the customer-generated documentation and other documentation were not sufficient to support the recognition of revenue prior to shipment under this program. Despite this information, with de Soto's approval, on October 11, 1993, Cypress publicly announced revenues of $2,009,122 for the quarter ended September 30, 1993, $982,650, or 49%, of which consisted of revenues related to the volume discount program. Thereafter, de Soto drafted Cypress' report on Form 10-Q, including the MD&A narrative, which failed to make adequate disclosures concerning the Company's revenue recognition policy related to the volume discount program, as well as the Company's reliance upon the volume discount program for a substantial portion of the company's third quarter 1993 revenues. The form 10-Q, which was signed by de Soto, was filed with the Commission on November 3, 1993. After completing its year-end audit field work, Cypress' independent auditors concluded that revenue recognition for the volume discount program transactions was inappropriate, and Cypress restated its third quarter financial statements included in the form 10-Q on March 15, 1994 to reverse $791,781 of the $982,650 volume discount program revenue previously recognized.
De Soto's reinstatement to practice before the Commission as a preparer or reviewer, or a person responsible for the preparation or review, of financial statements of a public company to be filed with the Commission is conditioned on his undertaking that in his practice before the Commission his work will be reviewed by the independent audit committee of the company for which he works or in some other manner acceptable to the Commission. De Soto's reinstatement to practice before the Commission as an independent accountant is conditioned upon his making a showing before doing so that: (1) he, or any firm with which he is or becomes associated in any capacity, is and will remain a member of the SEC Practice Section of the American Institute of Certified Public Accountants Division for CPA Firms (the "SECPS") as long as he appears or practices before the Commission as an independent accountant; (2) he or the firm has received an unqualified report relating to his or the firm's most recent peer review conducted in accordance with the guidelines adopted by the SECPS; and, (3) he will comply with all applicable SECPS requirements, including all requirements for periodic peer reviews, concurring partner reviews, and continuing professional education, as long as he appears or practices before the Commission as an independent accountant.
On the basis of information supplied, representations made, and undertakings agreed to by de Soto, it appearing that de Soto has complied and will continue to comply with the terms of his suspension from practice before the Commission as an accountant, that no information has come to the attention of the Commission relating to his character, integrity, professional conduct or qualifications to practice before the Commission that would be a basis for adverse action against de Soto pursuant to Rule 102(e)(1)(iii) of the Commission's Rules of Practice, and that de Soto's offer to condition his reinstatement is fair and in the public interest, it is accordingly,
Ordered pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice that Alex P. de Soto, CPA is reinstated to appear and practice before the Commission as an accountant.
By the Commission.
Jonathan G. Katz
Secretary
Footnotes
-[1]-
See Accounting and Auditing Enforcement Release No. 817 , dated September 19, 1996. De Soto was allowed, pursuant to the order, to apply for reinstatement after three years upon making certain showings.
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SEC.gov | Cypress Bioscience Inc. and Alex P. De Soto
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