UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 RELEASE NO. 39447 / December 12, 1997 ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 995 / December 12, 1997 ADMINISTRATIVE PROCEEDING FILE NO. 3-8738 _____________________________ : In the Matter of : ORDER GRANTING APPLICATION : FOR REINSTATEMENT TO PRACTICE Warren L. Rawls, C.P.A. : AS AN ACCOUNTANT BEFORE THE : THE COMMISSION _____________________________: On June 27, 1995, Warren L. Rawls ("Rawls"), a certified public accountant, was suspended by the Commission from practicing as an accountant before the Commission as a result of an agreement reached with Rawls in settlement of public administrative proceedings instituted by the Commission against Rawls 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)> Rawls became the Chief Financial Officer of Littlefield, Adams & Company in January, 1994. Shortly after joining LFA, Rawls learned that the CEO had misrepresented to LFA's auditors that a $250,000 bank deposit was payment for consulting services earned in 1992 rather than the proceeds of stock sales. Rawls, upon learning of the misrepresentation to LFA's auditors, informed the CEO that he should tell the auditors that the <(1)> The institution of public administrative proceedings and the settlement and suspension of Rawls were announced in AAER 684. <(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). ======END OF PAGE 1====== $250,000 deposit represented stock sale proceeds rather than consulting fees. The CEO instructed Rawls not to provide this information to the auditors because they might resign as LFA's auditors. At year end 1993, LFA's books and records still reflected a receivable related to the unpaid consulting fees. To prevent the auditors from discovering that the CEO had previously lied to them concerning LFA's receipt of $250,000 in consulting fees, Rawls falsely described this receivable as owing from the CEO for stock sale proceeds, rather than consulting fees. Rawls did not tell the auditors what he had discovered until much later after the CEO had been removed from the company. As a result of recognizing the fictitious consulting fees, LFA overstated reported net income by at least $226,000 for the period ended September 30, 1993 and understated its reported net loss by at least $250,000 for the year ended December 31, 1993. LFA's auditors issued unqualified audit reports on LFA's 1993 financial statements. During that period the management of LFA engaged in fraudulent schemes and repeatedly lied to the audit firm's personnel to convince them that phony accounts receivable were authentic. Regardless, the Commission found that LFA's 1993 financial statements were not presented in conformity with generally accepted accounting principles ("GAAP"). Certain members of the management of LFA consented to injunctions in connection with this scheme as well as penalties. Rawls consented to the settlement of Rule 2(e) proceedings and to a suspension from practice as an accountant before the Commission, with the right to apply for reinstatement after two years upon meeting certain specified conditions. In connection with his request for reinstatement to practice before the Commission, Rawls has represented to the staff that he anticipates that he would be reinstated as Chief Financial Officer of LFA and plans to practice before the Commission in that capacity. Rawls has further represented as his undertaking that if he is reinstated 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, such financial statements will be reviewed by the independent audit committee of any company with which he is or will be associated, or in some other manner acceptable to the Commission. On the basis of information supplied by Rawls, it appearing that Rawls has complied with the terms of 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 Rawls pursuant to Rule 102(e) of the Commission's Rules of Practice, and that Mr. Rawls's offer to condition his reinstatement is fair and in the public interest, it is accordingly, ======END OF PAGE 2====== ORDERED pursuant to Rule 102(e)(5)(i) of the Commission's Rules of Practice that Warren L. Rawls is reinstated to appear and practice before the Commission as an accountant responsible for preparing or reviewing the financial statements of a public company to be filed with the Commission 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 Rawls 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 ======END OF PAGE 3======