UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION Securities Exchange Act of 1934 Release No. 38359 / March 4, 1997 Accounting and Auditing Enforcement Release No. 892 Administrative Proceeding File No. 3-9265 ----------------------------------- : ORDER INSTITUTING IN THE MATTER OF : PROCEEDINGS PURSUANT : TO SECTION 21C OF THE ROBERT JARKOW, : SECURITIES EXCHANGE ACT : OF 1934, MAKING FINDINGS Respondent. : AND IMPOSING CEASE-AND- : DESIST ORDER : ------------------------------------ I. The Securities and Exchange Commission deems it appropriate and in the public interest that public cease-and-desist proceedings be instituted pursuant to Section 21C of the Securities Exchange Act of 1934 (15 U.S.C.  78u-3) against Robert Jarkow, former controller of Sound Advice, Inc. II. In anticipation of the institution of these proceedings, Respondent Jarkow has submitted an Offer of Settlement for the purpose of disposing of the issues raised by these proceedings, which Offer the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the matters set forth herein, except with respect to the jurisdiction of the Commission over him and over the matters set forth in the Order, which are admitted, Respondent Jarkow consents to the issuance of the Order Instituting Cease-and-Desist Proceedings, Findings and Order of the Commission. The Commission has determined that it is appropriate and in the public interest to accept Jarkow's Offer of Settlement and accordingly it is issuing this Order. ACCORDINGLY, IT IS ORDERED that the proceedings pursuant to Section 21C of the Securities Exchange Act of 1934 be and hereby are instituted. ==========================================START OF PAGE 2====== III. Based on the foregoing and the Offer of Settlement submitted by Robert Jarkow, the Commission finds -[1]- that: A. PARTIES 1. Sound Advice, Inc. is a Florida corporation headquartered in Dania, Florida. Sound Advice is a retailer of consumer electronics and since 1986, its stock has been registered with the Commission pursuant to Section 12(g) of the Exchange Act and has been listed and traded on NASDAQ. 2. Robert Jarkow, a certified public accountant, was Sound Advice's controller from February 1991 to November 1991. As controller, Jarkow was responsible for following accounting policies and procedures and maintaining the company's books and records. Jarkow was Sound Advice's controller during the period in which the company s fiscal 1991 annual financial statements were prepared for inclusion in its Form 10-K for the year ended June 30, 1991 filed with the Commission on September 30, 1991. B. BACKGROUND After being hired as Sound Advice's controller in February 1991, Jarkow became increasingly aware, either directly or indirectly, that the Company was using accounting methods which were not in accordance with generally accepted accounting principles ("GAAP"). Before the filing of Sound Advice s Form 10-K for the year ended June 30, 1991, Jarkow knew that the company's use of these improper accounting methods had resulted in misstatements affecting Sound Advice's inventory, receivables, expenses and other accounts included in the company s books and records. Jarkow knew or should have known that, as a result of these misstatements, Sound Advice's reported fiscal 1991 operating results were overstated. This overstatement had a material effect on the overall results of operation of Sound Advice. His failure to take sufficient action to correct these known misstatements caused Sound Advice to file false and misleading financial statements in its fiscal year 1991 Form 10-K. C. SOUND ADVICE'S FALSE FILINGS Sound Advice filed with the Commission and disseminated to the public its 1991 annual report on Form 10-K which contained ---------FOOTNOTES---------- -[1]- The findings herein are made pursuant to Jarkow's Offer of Settlement and are not binding on any other person or entity named as a respondent in this or any other proceeding. ==========================================START OF PAGE 3====== materially misstated financial statements caused in part by Jarkow. On July 15, 1992, Sound Advice restated its financial statements for the year ended June 30, 1991 in recognition of its failure to account for many of its transactions in conformity with GAAP.-[2]- The restatement of Sound Advice's fiscal 1991 financial statements affected pre-tax income as follows: As Percent Originally As Over- Reported Restated Stated For the year ended June 30, 1991 $4,745,217 $2,443,144 94% D. CONCLUSION Financial statements are the responsibility of the issuer and its accounting department, of which Jarkow was an important member. Investors are entitled to rely on the implicit representations that corporations will account for their funds properly. See SEC v. World-Wide Coin Investments Ltd., 567 F. Supp. 724, 747 (N.D. Ga. 1983). Jarkow, as controller, was responsible for following Sound Advice's accounting policies and procedures and for overseeing the recording of transactions in its books and records in accordance with GAAP. Jarkow failed to fulfill those responsibilities. ---------FOOTNOTES---------- -[2]- The Commission made findings, accepted offers of settlement, and ordered Sound Advice, Inc., chief executive officer, Peter Beshouri, and chief financial officer, Roy Casey, to cease and desist from committing or causing any violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, 13a-13, and 13b2-1 thereunder on August 9, 1995 (Securities Exchange Act of 1934 Release No. 34-36069, Accounting and Auditing Enforcement Release No. 696, 59 SEC Docket 2474). ==========================================START OF PAGE 4====== IV. Based on the foregoing, the Commission finds that: 1. Jarkow caused violations of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C.  78m(a)) and Rules 13a-1 and 12b-20 thereunder (17 C.F.R.  240.13a-1 and 12b-20) by filing financial statements that did not comply with GAAP in Sound Advice's Form 10-K for the fiscal year ended June 30, 1991. 2. Jarkow caused violations of Section 13(b)(2)(A) of the Securities Exchange Act of 1934 (15 U.S.C.  78m(b)(a)(A)), by failing to make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflected Sound Advice s transactions and dispositions of its assets. In addition, Jarkow directly and/or indirectly violated Rule 13b2-1 promulgated under Section 13(b)(2) of the Securities Exchange Act of 1934 (17 C.F.R.  240.13b2- 1) by falsifying, or causing to be falsified, Sound Advice's books and records. V. In view of the foregoing, it is in the public interest to enter an Order imposing the remedial sanctions agreed to in the Offer of Robert Jarkow. ACCORDINGLY, IT IS HEREBY ORDERED that Jarkow cease and desist from causing any violation, or future violation, directly or indirectly, of Sections 13(a)and 13(b)(2)(A) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, and 13b2-1 thereunder. By the Commission. Jonathan G. Katz Secretary