stock ticker: YPNT

Stocklemon Calls for the Immediate Resignation of Epstein, Weber & Conover, PLC due to numerous violations of Statement of Auditing Standards No 99:

“Consideration of Fraud in a Financial Statement Audit Summary”

Epstein, Weber & Conover, P.L.C.
8950 E. Raintree, Suite 200
Scottsdale, AZ 85260

The AICPA (American Institute of Certified Public Accountants) issued a new standard for all audits as of December 15, 2002 entitled the Statement of Auditing Standards No. 99 (SAS 99).

The new standard was not just a reaction to the Enron/WorldCom scandal but rather it represents the culmination of years of work by the accounting profession devoted to improving the likelihood that auditors could detect material misstatements due to fraud.

http://www.aicpa.org/members/div/auditstd/riasai/sas99.asp 

The characteristics of fraud that have been overlooked in YP.Net include: (a) concealment through collusion among management, employees, or third parties, (b) withheld, misrepresented, or falsified documentation, and (c) the ability of management to override or instruct others to override what would otherwise be effective controls.

The most important part of the regulation is the importance of exercising professional skepticism.  This section discusses the need for auditors to exercise professional skepticism when considering the possibility that a material misstatement due to fraud could be present.

Epstein Weber and Conover has cast a blind eye while YP.Net systematically  transferred over $12 million of shareholders’ money to a mysterious offshore entity that has strong and pervasive connections to management.  No skepticism has been exercised by auditor Mark Weber in the face of this obvious and gross irregularity.

SAS 99 instructs the auditors to “Evaluate the business rationale for significant unusual transactions.” 

The leasing of the yellow-pages.net URL from the offshore entities for $5 million is another unusual business transaction that has not been “rationalized” by Epstein Weber and Conover.  There is no justifiable basis for this violation.

Another aspect of SAS 99 requires auditors to “obtain the information needed to identify risks of material misstatement due to fraud.” This section requires the auditor to gather information necessary to identify risks of material misstatement due to fraud.   This would include meeting with all management.

During a three month period in 2002, YP.Net received the resignation of: Pamela Thompson, CFO, James Brophy, SEC Council, and Walter Vogel, Director.  Mr. Weber did not meet with these people regarding their concerns and therefore is in violation SAS 99.

SAS 99 further requires auditors to exercise additional professional skepticism when considering the risk of fraud; to have a questioning mind, regardless of histories with an organization.  Mr. Weber has been the auditor for 4 years, and has allowed his intimate history with upper management to interfere with his proper duties as an auditor.

Again, Epstein Weber and Conover are in violation of both the letter and the spirit of SAS 99.

The dollars involved in YP.Net’s misappropriations are not small.  The $12 million sent to the M&M Corporations in Antigua exceeds the amount of Martha Stuart’s alleged and Sam Waksal’s confessed wrongdoing combined.

Mark E. Weber has served as the auditor for YPNT for 4 years.  During this time, Mr. Weber has failed to comply with the high standards that are applied to auditors.  Most recently, he has failed to comply with all SAS 99 standards.  Therefore, Stocklemon is calling for the immediate resignation of Epstein Weber and Conover as the auditors of YP.Net.

CC:
Arizona Board of Accounting
SEC Public Oversight Committee
IRS Criminal Investigation Unit
Securities and Exchange Commission
American Institute of Certified Public Accountants