UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 RELEASE NO. 37350 / June 21, 1996 ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 795 / June 21, 1996 ADMINISTRATIVE PROCEEDING FILE NO. 3-8340 _____________________________ : In the Matter of : ORDER GRANTING APPLICATION : FOR REINSTATEMENT TO PRACTICE HARRY D. SWEENEY, C.P.A. : AS AN INDEPENDENT ACCOUNTANT : BEFORE THE COMMISSION _____________________________: On October 24, 1994, Harry D. Sweeney ("Sweeney"), a certified public accountant, was suspended by the Commission from practicing as an independent accountant before the Commission as a result of an agreement reached with Sweeney in settlement of public administrative proceedings instituted by the Commission against Sweeney pursuant to Rule 2(e) of the Commission's Rules of Practice.-[1]- This order is issued in response to his application for reinstatement to practice before the Commission.-[2]- Sweeney was the concurring partner on the 1987 audit and the engagement partner on the 1988 audit by Peat Marwick Main & Co. ("Peat") of Sahlen & Associates, Inc. ("Sahlen"), a public company that performed investigative services. Sahlen had adopted a new revenue recognition policy in its financial statements for the year ended June 30, 1985. Over the next three years, Sahlen exploited the new revenue recognition policy and engaged in a variety of other methods to record over $45 million ---------FOOTNOTES---------- -[1]- The institution of public administrative proceedings was announced April 20, 1994, in AAER 550 and the settlement and suspension of Sweeney were announced in AAER 619. -[2]- Rule 2(e) has been recodified in its entirety as Rule 102(e). Rule 102(e)(5)(i) provides: An application for reinstatement of a person permanently suspended or disqualified under paragraph (e)(1) or (e)(3) of this section may be made at any time, and the applicant may, in the Commission's discretion, be afforded a hearing; however, the suspension or disqualification shall continue unless and until the applicant has been reinstated by the Commission for good cause shown. 17 C.F.R.  201.102(e)(5)(i). ==========================================START OF PAGE 2====== of fictitious revenue. Sahlen filed for bankruptcy protection under Chapter 11 in May, 1989 and was subsequently liquidated. Certain members of the management of Sahlen were convicted of securities law and other criminal violations and sentenced to various terms of imprisonment as well as restitution and other penalties. Peat issued unqualified audit reports on Sahlen's financial statements for its 1985, 1986, 1987 and 1988 fiscal years. During that period the management of Sahlen engaged in fraudulent schemes and repeatedly lied to Peat personnel to convince them that phony accounts receivable were authentic. Regardless, the Commission found that the audits for 1987 and 1988 were not conducted in accordance with generally accepted auditing standards ("GAAS") and did not support a conclusion that Sahlen's 1987 and 1988 financial statements were presented in conformity with generally accepted accounting principles ("GAAP"). Sweeney consented to the settlement of Rule 2(e) proceedings and to a suspension from practice as an independent accountant before the Commission, with the right to apply for reinstatement after fifteen months upon meeting certain specified conditions. Sweeney has applied for reinstatement to practice before the Commission. Sweeney has demonstrated that: a. The firm with which Sweeney is associated is a member of the SEC Practice Section of the AICPA's Division for CPA Firms; and b. The firm with which Sweeney is associated has received an unqualified report relating to the firm's most recent peer review conducted in accordance with the guidelines adopted by the SEC Practice Section. Sweeney has represented to the staff that he plans to practice before the Commission and has undertaken to retain his membership in the AICPA SEC Practice Section and comply with its requirements as long as he practices before the Commission. On the basis of information supplied by Sweeney, it appearing that Sweeney has complied with his suspension from practice before the Commission, 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 Sweeney pursuant to Rule 102(e) of the Commission's Rules of Practice, and that Mr. Sweeney's offer to condition his reinstatement is fair and in the public interest, it is accordingly, ==========================================START OF PAGE 3====== ORDERED pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice that Harry D. Sweeney is reinstated to appear and practice before the Commission as an independent accountant subject to the undertakings set forth above; provided, however, that if it should subsequently appear to the Commission that any information that has been provided by Sweeney in connection with this application or any other Commission proceeding was false or misleading, then the Commission shall have the right to reopen this matter and reconsider whether reinstatement should be granted. By the Commission. Jonathan G. Katz Secretary