The Commission may censure any person, or deny, temporarily or permanently, to any person the privilege of appearing or practicing before the Commission in any way, if that person is found . . . (1) not to possess the requisite qualifications to represent others . . . (2) to be lacking in character or integrity, or to have engaged in unethical or improper professional conduct; or (3) to have willfully violated, or willfully aided and abetted the violation of, any provision of the securities laws or the rules and regulations thereunder.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission’s jurisdiction over him and the subject matter of these proceedings, which are admitted, and except as provided herein in Section V, Respondent consents to the entry of this Order Making Findings And Imposing Remedial Sanctions Pursuant to Section 8A of the Securities Act of 1933, Sections 4C and 21C of the Securities Exchange Act of 1934, and Rules 102(e) of the Commission’s Rules of Practice and a Cease-and-Desist Order, as set forth below.
The Commission may . . . deny, temporarily or permanently, the privilege of appearing or practicing before it . . . to any person who is found . . . to have engaged in unethical or improper professional conduct.
The Commission may . . . deny, temporarily or permanently, the privilege of appearing or practicing before it . . . to any person who is found...to have willfully violated, or willfully aided and abetted the violation of any provision of the Federal securities laws or the rules and regulations thereunder.
3 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.
Puissant Industries, Inc., UMED Holdings, Inc., and Valley High Mining Company, and for inclusion in Form S-1 registration statements of two clients, including ADM Endeavors, Inc. and Legendary Ventures Inc. (collectively the “Eight Issuers”).
2.	Johnson’s numerous audit deficiencies included, among other things, the failure to obtain engagement quality reviews, properly plan audits, obtain sufficient appropriate audit evidence, and maintain audit documentation. Johnson’s audits were so deficient that they amounted to no audits at all and could not be relied upon as having afforded him with a reasonable basis for his opinions regarding the financial statements that he audited. Moreover, Johnson falsely stated in audit reports that he conducted his audits “in accordance with the standards of the Public Company Accounting Oversight Board [PCAOB],” when, in fact, his conduct of the audits did not conform with and violated numerous PCAOB auditing standards.
3.	Johnson also created, or caused to be created, back-dated, artificial audit documentation for certain audit clients, which he produced to the Commission staff in response to document subpoenas as a contemporaneous work paper4. In reality, the work papers did not exist at the time of the actual audits, but were created after Johnson was requested to produce work papers in connection with the Commission staff’s investigation.
4.	Terry L. Johnson, age 56, a resident of Casselberry, Florida operates a self-named sole-proprietorship accounting firm in Casselberry, Florida. Johnson is a Florida-licensed CPA. Johnson’s accounting firm, “Terry L. Johnson, CPA, had its PCAOB registration withdrawn as of July 7, 2015.5 Johnson audited and issued audit reports, purportedly in accordance with PCAOB standards, for the December 31, 2012 and 2013 year-end financial statements of the Eight Issuers.
5.	ADM Endeavors, Inc. (“ADM”) is a Nevada corporation with its principal place of business in Bismarck, North Dakota. ADM has common stock registered pursuant to Section 12(g) of the Exchange Act and files periodic reports with the Commission pursuant to Section 13 of the Exchange Act. ADM has filed a Form S-1 registration statement, which became effective on May 14, 2015.
5 On December 17, 2013, Johnson’s accounting firm became a PCAOB-registered firm. On May 14, 2015, Johnson requested the withdrawal of his firm’s PCAOB registration.
6.	Boreal Water Collection, Inc. (“Boreal”) is a Nevada corporation with its principal place of business in Kiamesha Lake, New York. Boreal has common stock registered pursuant to Section 12(g) of the Exchange Act and files periodic reports with the Commission pursuant to Section 13 of the Exchange Act. Boreal’s common stock trades on OTC Link.
7. Legendary Ventures, Inc. (“Legendary”) is a Nevada corporation with its principal place of business in Mississauga, Ontario, Canada. Legendary has filed a Form S-1 registration statement that is currently being reviewed by the Division of Corporation Finance.
8. Monster Arts, Inc. (“Monster”) is a Nevada corporation with its principal place of business in San Clemente, California. Monster’s common stock is registered pursuant to Section 12(g) and files periodic reports with the Commission pursuant to Section 13 of the Exchange Act. Monster is delinquent in its Exchange Act reporting obligations, having failed to file its Form 10-K for the fiscal year ended December 31, 2014 and Form 10-Q for the quarter ending March 31, 2015. Monster’s common stock trades on OTC Link.
9. Primco Management, Inc. (“Primco”) is a Delaware corporation with its principal place of business in Seattle, Washington. Primco has common stock registered pursuant to Section 12(g) of the Exchange Act and files periodic reports with the Commission pursuant to Section 13 of the Exchange Act. Primco is delinquent in its Exchange Act reporting obligations, having failed to file its Form 10-Q for the quarter ending March 31, 2015. Primco’s common stock trades on OTC Link.
10. Puissant Industries, Inc. (“Puissant”) is a Florida corporation with its principal place of business in London, Kentucky. Puissant filed periodic reports with the Commission pursuant to Section 13 and 15(d) of the Exchange Act through December 31, 2014. On December 31, 2014, Puissant filed a Form 15 to terminate or suspend its duty to file reports with the Commission. Puissant’s common stock trades on OTC Link.
11. UMED Holdings, Inc. (“UMED”) is a Texas corporation with its principal place of business in Fort Worth, Texas. UMED has common stock registered pursuant to Section 12(g) of the Exchange Act and files periodic reports with the Commission pursuant to Section 13 of the Exchange Act. UMED’s common stock trades on OTC Link.
12. Valley High Mining Company (“Valley High”) is a Nevada corporation with its principal place of business in Silverdale, Washington. Valley High has common stock registered pursuant to Section 12(g) of the Exchange Act and files periodic reports with the Commission pursuant to Section 13 of the Exchange Act. Valley High’s common stock trades on OTC Link.
13. Johnson was first registered with the PCAOB on December 17, 2013. Within two months of becoming registered, Johnson acquired eighteen new issuer audit clients. The vast majority of these audit clients were previously audited by an auditor who was censured and barred from being an associated person of a registered public accounting firm by the PCAOB in March 2014. Once the predecessor auditor’s registration was revoked by the PCAOB, Johnson, who had previously worked for the predecessor auditor, became the new auditor for audit clients of the predecessor auditor. Out of the eighteen audit clients, at least two were previously audited by a second predecessor auditor, who was also previously sanctioned by the PCAOB in November 2013. Johnson had no prior experience in serving as an engagement partner for Commission registrants prior to the numerous engagements that he picked up after the predecessor auditors were barred by the PCAOB.
14.	For the audits of the Eight Issuers, Johnson falsely stated that he had conducted his audits in accordance with the standards of the PCAOB. Johnson’s audits were grossly deficient, evidencing numerous and repeated violations of auditing standards and, among other things, lacked audit planning, engagement quality reviews, audit documentation, and sufficient appropriate audit evidence.
15.	PCAOB Auditing Standard No. 7, Engagement Quality Review, requires an engagement quality review (“EQR”) and concurring approval of issuance for each audit engagement and each engagement to review interim financial information. Auditing Standard No. 7, ¶ 1. To maintain objectivity, the engagement quality reviewer should not make decisions on behalf of the engagement team or assume any of the responsibilities of the engagement team. Auditing Standard No. 7, ¶ 7. Johnson repeatedly failed to comply with PCAOB Auditing Standard No. 7.
16.	Auditing Standard No. 7 allows firms, including sole practitioners such as Johnson, to engage qualified individuals from outside the firm to serve as the engagement quality reviewer. Auditing Standard No. 7, ¶ 3. Johnson knew that each of his audit engagements required an EQR, but failed to obtain an EQR for the December 31, 2012 and 2013 audits of the financial statements of the Eight Issuers.
17.	Johnson also failed to obtain engagement quality reviews of the March 31 and June 30, 2014 quarterly reviews of ADM, Boreal Water, Monster, Primco, Puissant, UMED and Valley High; the March 31, 2014 quarterly review of Legendary.
18.	Johnson repeatedly violated PCAOB Auditing Standard No. 3, Audit Documentation, which requires that audit documentation contain sufficient information to enable an experienced auditor, having no previous connection with the engagement (a) to understand the nature, timing, extent, and results of the procedures performed, evidence obtained, and conclusions reached, and (b) to determine who performed the work and the date such work was completed. Auditing Standard No. 3, ¶ 6, Audit Documentation. If, after the documentation completion date, an auditor becomes aware, as a result of a lack of documentation or otherwise, that audit procedures may not have been performed, evidence may not have been obtained, or appropriate conclusions may not have been reached, the auditor must determine, and if so demonstrate that, sufficient procedures were performed, sufficient evidence was obtained, and appropriate conclusions were reached with respect to the relevant financial statement assertions. To accomplish this, the auditor must have persuasive other evidence, and oral explanations alone does not constitute persuasive other evidence. Auditing Standard No. 3, ¶ 9, Audit Documentation.
19.	Johnson’s audit work papers related to the December 31, 2012 and 2013 year-end audits of the Eight Issuers were grossly deficient. The audits consistently failed to include evidence of the procedures performed, evidence obtained, and conclusions reached with respect to relevant financial statement assertions.
20.	Johnson was engaged to perform a re-audit of the December 31, 2012 year-end financial statements of six audit clients, including, ADM, Boreal, Legendary, Monster, Puissant, and UMED, as a result of the PCAOB revoking the registration of the predecessor auditor. Johnson was required to take full responsibility for the 2012 audits and perform his own audit work that provided a basis for his opinion on the financial statements.6 Johnson, however, relied on the predecessor auditor’s audit work to afford a basis for his 2012 audit opinions, without performing an independent audit.
22.	Johnson’s 2012 audits of Primco and Valley High (which were not audited by the predecessor auditor), were lacking in work paper documentation, evidence obtained, or evidence that he performed audit procedures to reach conclusions with respect to the relevant financial statement assertions.
23.	Johnson’s audit work papers related to the December 31, 2013 year-end audits of the Eight Issuers were grossly deficient. The audits failed to include evidence of the procedures performed, evidence obtained, and conclusions reached with respect to relevant financial statement assertions. For example, for all Eight Issuers, Johnson’s files contained no work papers related to significant categories of financial statement line items and transactions including cost of sales, operating expenses, and equity transactions.
6 If the successor auditor accepts the re-audit engagement, he or she may consider the information obtained from inquiries of the predecessor auditor and review of the predecessor auditor's report and working papers in planning the re-audit. However, the information obtained from those inquiries and any review of the predecessor auditor's report and working papers is not sufficient to afford a basis for expressing an opinion. The nature, timing, and extent of the audit work performed and the conclusions reached in the re-audit are solely the responsibility of the successor auditor performing the re-audit. AU 315 ¶ 15, Communication Between Predecessor and Successor Auditors. The successor auditor should plan and perform the re-audit in accordance with PCAOB standards. AU 315 ¶ 16.
25. For the audit of Primco, for example, Johnson had no copy of the issuer’s Form 10-K (or subsequent amended 10-Ks) in his work papers. Primco subsequently restated its Form 10-K because it later came to Johnson’s attention that the issuer “inadvertently” included among other things, approximately $1,496,000 in assets on the balance sheet that should not have been recorded in the company’s books and records. Significantly, as a result of the restatement, certain amounts reflected in Primco’s original tax footnote should have changed in the restated filing but were not. Johnson, however, did not review the tax footnote.
26. In other instances, for the audits of Puissant, UMED and Valley High, Johnson had a copy of the Commission filing in his work papers which contained no notations or any other evidence that he reviewed the financial statements contained within those filings. Further, for the audits of Monster and Boreal, for example, the work papers included a printout of the issuers’ filings with a header containing the SEC EDGAR internet address, demonstrating that that the filings were printed from the SEC EDGAR website and inserted in the work papers after they were filed with the Commission. Therefore, no evidence existed in the work papers indicating that Johnson reviewed the financial statements or read and considered the other information contained in those documents before they were filed with the Commission.
27. Two other clients, ADM and Legendary, had filed a series of amended Form S-1s with the Commission. The work papers do not contain evidence that Johnson reviewed the financial statements contained within these filings in order to reconcile them with the underlying accounting records. The ADM work papers merely contained a copy of the last amended Form S-1, but no copies of the previous three amended Form S-1s that included his opinions. The Legendary work papers contained a copy of the first Form S-1 filed, but none of the subsequent amended Form S-1 filings. Legendary’s second amended Form S-1 contained a restatement of previously issued financial statements and the inclusion of the financial statements of an additional interim period, but a copy of which was not included in the work papers.
7 The auditor’s substantive procedures must include reconciling the financial statements with the underlying accounting records. AS No. 13 ¶ 41, The Auditor’s Responses to the Risks of Material Misstatement.
8 Other information in a document may be relevant to an audit performed by an independent auditor or to the continuing propriety of his report. The auditor's responsibility with respect to information in a document does not extend beyond the financial information identified in his report, and the auditor has no obligation to perform any procedures to corroborate other information contained in a document. However, he should read the other information and consider whether such information, or the manner of its presentation, is materially inconsistent with information, or the manner of its presentation, appearing in the financial statements. AU 550 ¶ 04, Other Information in Documents Containing Audited Financial Statements.
28. PCAOB Auditing Standard No. 3, Audit Documentation requires that prior to the report release date, the auditor must have completed all necessary auditing procedures and obtained sufficient evidence to support the representations in the auditor's report. A complete and final set of audit documentation should be assembled for retention as of a date not more than 45 days after the report release date (documentation completion date). Auditing Standard No. 3, ¶ 15, Audit Documentation. Circumstances may require additions to audit documentation after the report release date. Audit documentation must not be deleted or discarded after the documentation completion date; however, information may be added. Any documentation added must indicate the date the information was added, the name of the person who prepared the additional documentation, and the reason for adding it. Auditing Standard No. 3, ¶ 16, Audit Documentation. Johnson repeatedly failed to comply with PCAOB Auditing Standard No. 3.
29. Johnson failed to document the addition of several documents to the work papers after the documentation completion date for the Puissant and Primco engagements, as required by Auditing Standard No. 3, Audit Documentation. To the contrary, Johnson, after receiving a request for work papers by Commission staff, engaged in a scheme with several of his audit clients to draft back-dated, fraudulent work papers and create the appearance of having proper contemporaneous work papers.
9 No report release date is documented in the work papers. In fact, April 14, 2014 represents the date Puissant’s Form 10-K was filed with the Commission. Johnson’s audit opinion is also dated April 14, 2014.
10 No report release date is documented in the work papers. April 15, 2014 represents the date Primco’s Form 10-K was filed with the Commission.
32. Johnson repeatedly violated PCAOB Auditing Standard No. 15, Audit Evidence, which requires that the auditor must plan and perform audit procedures to obtain sufficient appropriate audit evidence to provide a reasonable basis for his or her opinion. Auditing Standard No. 15, ¶ 4, Audit Evidence. Sufficiency is the measure of the quantity of audit evidence. Appropriateness is the measure of the quality of audit evidence, i.e., its relevance and reliability. To be appropriate, audit evidence must be both relevant and reliable in providing support for the conclusions on which the auditor's opinion is based. Auditing Standard No. 15, ¶ 5-6, Audit Evidence. Johnson repeatedly failed to comply with Auditing Standard No. 15.
33. In those instances which Johnson prepared audit work papers, they were perfunctory and did not contain sufficient and appropriate audit evidence to provide a reasonable basis for his opinions. The lack of sufficient and appropriate audit evidence is pervasive throughout the audits for the Eight Issuers.
34. For the audit of Valley High, Johnson prepared a work paper related to “mineral rights,” the company’s principal asset, representing 80% and 98% of its total assets at December 31, 2013 and 2012, respectively. The mineral rights represented monies paid by Valley High to a newly formed joint venture that was going to operate and develop mineral properties in Peru. In 2013, the joint venture was terminated because Valley High could not access the mining property. Johnson included a note on the relevant work paper stating that “per agreement all payments made by VHMC [Valley High] will be returned one year after y/e 12/31/13.” Johnson, however, failed to obtain any evidence on whether the monies paid by Valley High and included on the balance sheet would be recovered or returned. Further, once the joint venture was terminated, the amounts due to Valley High should have been classified as a receivable due to Valley High. However, Johnson knew that the amount was still misclassified as “mineral rights” in Valley High’s December 31, 2013 financial statements.
35. In an email dated September 10, 2014 from Johnson to the CEO of Valley High, Johnson stated “Also, I need backup for the mineral rights property at 12/31/13...” and “the mineral rights should have been written off at 12/31/13.”11 This email was sent approximately six months after Valley High’s December 31, 2013 Form 10-K was filed with the Commission. Johnson knew that, by September, Valley High believed that it would not recover the monies and, thus, would have to write-off the amount in the third quarter of 2014. Valley High’s September 30, 2014 Form 10-Q, the company’s most recent filing, however, still included the non-existent asset on its balance sheet.
11 The email was sent by Johnson to his client shortly after Johnson received the first document request from the Commission staff on August 26, 2014.
36.	In 2012, UMED acquired a tea bush farm located in Hawaii for consideration of 5.5 million restricted shares and $278,000 in cash. At December 31, 2012 and 2013, UMED valued the tea bushes at $750,000, and this item constituted the second largest asset recorded on the books and records of the company. Notwithstanding its significance, only two work papers addressed this transaction, including: (1) a “property, plant and equipment” work paper, which listed the tea bushes as a single line item and included the notation, “traced to original agreement,” next to this line item; and (2) an undated two sentence memo which stated “Traveled to Wood Valley to observe existence of ranch. Attached find pictures of the farm as well as documents that were found online regarding the farm.” The audit evidence Johnson obtained with respect to financial statement assertions associated with this asset was wholly inadequate and do not indicate that Johnson did any inspection of or confirmation of the existence of the tea farm, its tea bushes, facilities and equipment.
37. For the Monster, Primco and Valley High engagements, Johnson failed to obtain “sufficient appropriate” evidence concerning the recording of “derivative liabilities,” which generally arise when certain features of convertible debt are required to be accounted for separately as a derivative financial instrument. Johnson performed no analyses to determine whether the issuers’ convertible notes, including the potential for recording a related derivative liability, were appropriately accounted for under Generally Accepted Accounting Principles (“GAAP”). Nor did Johnson obtain evidence to determine whether the derivative liabilities were valued correctly or should have even been recorded in the first place.
38. Monster, for example, recorded an implausibly large derivative liability in the amount of $21,876,947 on its December 31, 2013 balance sheet that pertained to only $261,000 in outstanding convertible notes. The derivative liability work papers contained implausible assumptions, including, for example, a risk-free rate, used to calculate the derivative liability.12 During the relevant time, the risk-free rate would have been less than 1%, but the rate documented in the work papers and used in calculating the liability was 10%. Had Johnson reviewed the company’s footnotes, he would have noted the company disclosed that it was using risk-free rates of less than 1% in its calculations for valuing stock options. Johnson testified that he did not understand the risk-free rate assumption used to value the derivative. Thus, the audit evidence Johnson obtained with respect to financial statement assertions associated with these liabilities was completely deficient.
12 The risk-free rate generally represents the discount rate on short term U.S. Government Treasury Bills.
40. For the UMED audit, revenue “testing” consisted of Johnson including a notation next to the revenue balance on the income statement simply stating that revenue recorded was the result of the purchase of another entity. The only procedure Johnson performed with respect to revenue was to trace a sample of individual sales transactions to an “invoice,” “contract” or “customer file.” The work papers did not provide any information pertaining to how the sample was determined or the basis for selecting items to “test.” In addition, the work papers did not provide any details concerning the invoice, contract or file that was examined. Johnson did not obtain sufficient appropriate evidence pertaining to whether fundamental revenue recognition criteria had been met. Further, Johnson did not test whether the sales were realized or recorded in the appropriate period.
41. For all Eight Issuers, Johnson glossed over the audit testing of revenue and failed to obtain sufficient appropriate evidence that reported sales did in fact occur. The grossly deficient audits of revenue combined with the non-existent audits of cost of sales and operating expenses, resulted in essentially “non-audits” of the Eight Issuers income statements. Accordingly, based on the foregoing, Johnson failed to comply with PCAOB Auditing Standard No. 15 for the audits of the Eight Issuers.
42. Johnson repeatedly violated PCAOB Auditing Standard No. 9, Audit Planning, which requires that planning the audit includes establishing the overall audit strategy for the engagement and developing an audit plan, which includes, in particular, planned risk assessment procedures and planned responses to the risks of material misstatement. Auditing Standard No. 9, ¶ 5, Audit Planning. The auditor should develop and document an audit plan that includes a description of: the planned nature, timing, and extent of the risk assessment procedures; the planned nature, timing, and extent of tests of controls and substantive procedures; and other planned audit procedures required to be performed so that the engagement complies with PCAOB standards. Auditing Standard No. 9, ¶ 10, Audit Planning. The purpose and objective of planning the audit are the same for an initial audit or a recurring audit engagement. However, for an initial audit, the auditor should determine the additional planning activities necessary to establish an appropriate audit strategy and audit plan, including determining the audit procedures necessary to obtain sufficient appropriate audit evidence regarding the opening balances. Auditing Standard No. 9, ¶ 19, Audit Planning. Johnson’s audits of the financial statements of the Eight Issuers violated PCAOB Auditing Standard No. 9.
13 2013 revenues amounted to $32,568. The materiality threshold Johnson had calculated for this audit was $25,000.
43. The work papers for the Eight Issuers contained the same types of forms, checklists and questionnaires that amounted to nothing more than superficial planning work papers for each audit. The veneer of the audit planning work performed is demonstrated by the fact that the audit planning work papers for four of the issuers contained basic erroneous information that related to other issuers. For example, some of the planning forms contained the names of other clients, names of employees from other issuers and/or references to fiscal years Johnson did not audit. The evidence indicates that Johnson just copied planning documents from one client to another without taking the time to change or delete incorrect information.
45. With the exception of audit clients, Boreal and Primco, Johnson did not meet any employee of the Eight Issuers or visit their offices.
47. Further, the planning work papers did not include documentation concerning the planned nature, timing, and extent of substantive procedures and other planned audit procedures required to be performed so that the engagement complies with PCAOB standards. In addition, the work papers did not contain any planning documents concerning the audit procedures necessary to obtain sufficient appropriate audit evidence regarding the opening balances. In fact, Johnson’s audit files contained no audit programs for any account balances.
48. The objective of a review of interim financial information pursuant to AU § 722, Interim Financial Information, is to provide the accountant with a basis for communicating whether he or she is aware of any material modifications that should be made to the interim financial information for it to conform with GAAP. A review consists principally of performing analytical procedures and making inquiries of persons responsible for financial and accounting matters, and does not contemplate (a) tests of accounting records through inspection, observation, or confirmation; (b) tests of controls to evaluate their effectiveness; (c) obtaining corroborating evidence in response to inquiries; or (d) performing certain other procedures ordinarily performed in an audit. AU § 722.07. Johnson’s review of the interim financial information of the Eight Issuers did not meet the standards required of a reviewing accountant by AU § 722.07, Interim Financial Information.
14 To plan the nature, timing, and extent of audit procedures, the auditor should establish a materiality level for the financial statements as a whole that is appropriate in light of the particular circumstances. AS No. 11, ¶ 6, Consideration of Materiality in Planning and Performing an Audit.
15 This work paper contained a list of factors that might create incentives or pressures for management to commit fraud. In order to help assess the risk of misstatement due to fraud, the auditor indicates whether each stated factor is present at the issuer.
49. The accountant should apply analytical procedures to the interim financial information to identify and provide a basis for inquiry about the relationships and individual items that appear to be unusual and that may indicate a material misstatement. Analytical procedures, for the purposes of this section, should include, among other things, comparing the quarterly interim financial information with comparable information for the immediately preceding interim period and the quarterly and year-to-date interim financial information with the corresponding period(s) in the previous year, giving consideration to knowledge about changes in the entity's business and specific transactions. AU §722.16, Interim Financial Information. The auditor should also obtain evidence that the interim financial information agrees or reconciles with the accounting records. AU §722.18, Interim Financial Information.
50. In each quarterly review work paper file for the Eight Issuers, Johnson included a half page to one page work paper which constituted his “analytical procedures” for that period. In all the quarterly review work papers produced to the staff, no balance sheet accounts were subject to analytical procedures. The analytical procedures applied to the interim income statement line items were perfunctory and contained no meaningful analysis of variances in account balances from one period to another.
52. In many instances, material variances were not investigated. Further, the analytical procedures pertaining to the income statement accounts did not contain comparisons of the current interim financial information to the immediately preceding interim period. Because this comparison was not completed, Johnson did not identify that Primco’s revenue for the three month period ended March 30, 2014 and June 30, 2014 did not equal the revenue for the six months ended June 30, 2014. This error is contained in Primco’s June 30, 2014 Form 10-Q. Finally, in each quarterly review, Johnson failed to obtain evidence that the interim financial information agreed or reconciled with the accounting records.
53. Accounting Standards Codification No. 932, Extractive Activities – Oil and Gas (formerly FASB Statement No. 69, Disclosures About Oil and Gas Producing Activities), requires publicly traded entities that have significant oil and gas producing activities to include, with complete sets of annual financial statements, supplementary disclosures of proved oil and gas reserve quantities, changes in reserve quantities, a standardized measure of discounted future net cash flows relating to reserve quantities, and changes in the standardized measure.
54. Required supplementary information differs from other types of information outside the basic financial statements because the FASB considers the information an essential part of the financial reporting of certain entities and because authoritative guidelines for the measurement and presentation of the information have been established. Accordingly, the auditor should apply certain limited procedures to required supplementary information and should report deficiencies in, or the omission of, such information. AU § 558.06, Required Supplementary Information.
55. Johnson violated AU § 558 by failing to apply certain limited procedures to required supplementary information with respect to his audits of the December 31, 2012 and 2013 year-end financial statements of Puissant. Johnson failed to undertake any procedures with respect to the “Supplemental Disclosures about Oil and Gas Producing Activities” contained in Puissant’s Form 10-K. Johnson claimed to have reviewed a report from the engineer hired by Puissant to help prepare the supplemental disclosures. However, this report was not in the work papers and no other evidence exists suggesting Johnson reviewed the report. Among other things, Johnson should have inquired whether the person who estimated the issuer’s reserve information had appropriate qualifications and make certain other comparisons and inquiries related to information contained in the supplemental disclosures. Further, Johnson’s work papers did not include a copy of the engineer’s report and there is no evidence that Johnson reviewed this report.
56. Based on the foregoing, Johnson did not meet the standards required of an audit by AU § 558, Required Supplementary Information.
57. An independent auditor's report ordinarily is issued in connection with historical financial statements that purport to present financial position at a stated date and results of operations and cash flows for a period ended on that date. However, events or transactions sometimes occur subsequent to the balance-sheet date, but prior to the issuance of the financial statements, which have a material effect on the financial statements and therefore require adjustment or disclosure in the statements. These occurrences hereinafter are referred to as "subsequent events." AU § 560.01, Subsequent Events. Subsequent events require consideration by management and evaluation by the independent auditor. AU § 560.02, Subsequent Events. The independent auditor should perform other auditing procedures with respect to the period after the balance sheet date for the purpose of ascertaining the occurrence of subsequent events that may require adjustment or disclosure essential to a fair presentation of the financial statements in conformity with generally accepted accounting principles. AU § 560.12, Subsequent Events.
59.	Accordingly, Johnson violated AU § 560.02 and § 560.12 by failing to properly evaluate the subsequent events to determine whether Valley High should adjust or disclose a non-collectible receivable on its December 31, 2013 balance sheet.
60.	Due professional care is to be exercised in the planning and performance of the audit and the preparation of the report. AU § 230.01, Due Professional Care in the Performance of Work. This standard requires the independent auditor to plan and perform his or her work with due professional care. Due professional care imposes a responsibility upon each professional within an independent auditor's organization to observe the standards of field work and reporting. AU § 230.02. The matter of due professional care concerns what the independent auditor does and how well he or she does it. AU § 230.04. An auditor should possess "the degree of skill commonly possessed" by other auditors and should exercise it with "reasonable care and diligence" (that is, with due professional care). AU § 230.05.
61.	Johnson violated AU § 230.01 as evidenced by his repeated audit deficiencies such as his failure to obtain engagement quality reviews, properly plan audits, obtain sufficient appropriate audit evidence, and maintain audit documentation.
62.	PCAOB standards require that the auditor’s standard report state that the financial statements present fairly, in all material respects, an entity’s financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. This conclusion may be expressed only when the auditor has formed such an opinion on the basis of an audit performed in accordance with PCAOB standards. AU § 508.07, Report on Audited Financial Statements.
16 Subsequent events affecting the realization of assets such as receivables and inventories or the settlement of estimated liabilities ordinarily will require adjustment of the financial statements (see paragraph .03) because such events typically represent the culmination of conditions that existed over a relatively long period of time. AU § 560.07, Subsequent Events.
63.	Regulation S-X, 17 CFR § 210 et seq., prescribes the qualifications of accountants and the contents of the accountants’ reports that must be submitted with corporate financial statements. This regulation defines “audit,” when used in regard to financial statements, to mean an examination of the financial statements by an independent accountant in accordance with generally accepted auditing standards (“GAAS”), as may be modified or supplemented by the Commission, for the purpose of expressing an opinion thereon.17 17 CFR § 210.1-02(d). “[R]eferences in Commission rules and staff guidance and in the federal securities laws to GAAS or to specific standards under GAAS, as they relate to issuers, should be understood to mean the standards of the PCAOB plus any applicable rules of the Commission.” (See SEC Release No. 34-49708 (May 14, 2004)). Thus, an auditor violates Regulation S-X Rule 2-02(b)(1) if it issues a report stating that it had conducted its audit in accordance with PCAOB standards when it had not. See Andrew Sims, CPA, Rel. No.34-59584, AAER No. 2950 (Mar. 17, 2009) (settled action). Johnson failed to comply with PCAOB standards in every audit engagement examined by the staff.
64.	The culmination of Johnson’s numerous audit deficiencies rendered any representations that the audits were conducted in accordance with the PCAOB standards materially false and misleading because the audits were grossly out of compliance. Johnson made such representations in each of his audit reports for the Eight Issuers, falsely stating that his audits of the issuers’ financial statements were conducted in accordance with the standards of the PCAOB.
65. An auditor violates Section 10(b) and Rule 10b-5 thereunder by preparing or certifying a false audit report that he knew would be included in a Form 10-K. McGann v. Ernst & Young, 102 F.3d 390, 397 (9th Cir. 1996). Johnson violated the antifraud provisions by issuing audit reports that falsely stated that his audit were conducted in accordance with PCAOB standards. In fact, Johnson’s auditing practices were so deficient that the audits amounted to no audits at all. See, e.g., SEC v. Moore, Lit. Rel. No. 21189A (Aug. 27, 2009) (auditor consented to an injunction against future violations of Exchange Act Section 10(b) and Rule 10b-5 thereunder for failure to comply with PCAOB standards where his audits were assisted by high school graduates hired with little or no education or experience in accounting or auditing); Norman Stumacher, CPA, Rel. No. 34-58624 (Sept. 23, 2008) (auditor violated Exchange Act Section 10(b) and Rule 10b-5 thereunder when he falsely claimed his audits were conducted in accordance with GAAS, GAAP, and professional standards); SEC v. Midgley, Case No. 2:96-cv-00783 (D. Utah, March 3, 1997) (permanent injunction issued against auditor for violations of Exchange Act Section 10(b) and Rule 10b-5 thereunder where he committed gross violations of GAAS).
66. In Janus Capital Group, Inc. v. First Derivative Traders, 131 S.Ct. 2296 (2011), the Supreme Court held that persons “with ultimate authority over the statement, including its content and whether and how to communicate it,” may be held primarily liable for “making” a misleading statement under Section 10(b) and Rule 10b-5(b) Id. at 2302. Accordingly, primary liability under Rule 10b-5(b) attaches to a person with “ultimate authority” over the fraudulent statements.
17 These standards include the auditing standards adopted by the PCAOB following passage of the Sarbanes-Oxley Act of 2002.
67. Johnson had ultimate authority over the audit opinions issued in his name, or in the firm’s name. Johnson is the only person in his firm with the authority to sign the firm’s audit reports or consent to its inclusion in public filings. Accordingly, under Janus, Johnson is the “maker” of the statements in the Johnson firm’s audit reports. Thus, Johnson willfully violated Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, as the knowing “maker” of the materially false or misleading audit reports included in the Form 10-K filings of six of his audit clients.
68. Rule 2-02(b)(1) of Regulation S-X requires an accountant’s reports to state “whether the audit was made in accordance with generally accepted auditing standards.” “[R]eferences in Commission rules and staff guidance and in the federal securities laws to GAAS or to specific standards under GAAS, as they relate to issuers, should be understood to mean the standards of the PCAOB plus any applicable rules of the Commission.” (See SEC Release No. 34-49708 (May 14, 2004)). Thus, Johnson also willfully violated Regulation S-X Rule 202(b)(1) when he issued his audit reports stating that he had conducted his audits in accordance with PCAOB standards, when he had not. See In re Andrew Sims, CPA, Rel. No. 34-59584, AAER No. 2950 (Mar. 17, 2009) (settled action).
69. Johnson’s audit reports provided public investors with the false impression that Johnson’s audits of the financial statements included in Form 10-K filings of six issuer clients (Boreal, Monster, Primco, Puissant, UMED, and Valley High) were in accordance with PCAOB standards and applicable rules of the Commission and, thus, reliable. For instance, an investor examining Valley High’s December 31, 2013 financial statements, in the their Form 10-K filed with the Commission on April 15, 2014, might take comfort in Valley High’s $75,000 note receivable as an asset that may ultimately provide some liquidity to a company that has no cash on its balance sheet.
70. An accounting firm acts "in connection with" securities trading when it produces an audit report that it knows its client will include in a Form 10-K. McGann v. Ernst & Young, Id. at 397. At the time Valley High filed its Form 10-K, Valley High’s common stock was trading on OTC Link. Accordingly, its audited financial statements, which investors rely on, and Johnson’s materially false certifications thereof, constituted material misstatements in connection with the purchase or sale of Valley High securities trading on OTC Link.
71. In addition, Johnson’s materially false audit reports on the financial statements of Boreal Water, Monster, Primco, Puissant and UMED were in connection with the purchase and sale of securities of these issuers. Each of these issuers had equity securities trading on OTC Link or OTC BB at the time the issuers’ respective Forms 10-K were publicly filed. Accordingly, Johnson willfully violated Section 10(b) of the Exchange Act, Rule 10b-5(b) thereunder, and Rule 2-02(b)(1) of Regulation S-X.
72. The Commission has charged auditors with violation of Section 17(a) of the Securities Act where the conduct of an audit was so deficient that it would be knowing or reckless to assert that the audit was performed in accordance with GAAS. See, e.g., SEC v. Friehling, Lit. Rel. No. 20959 (Mar. 18, 2009) (charged with violation of antifraud provisions, including Securities Act 17(a), for among other things, falsely stating in annual audit reports that he audited Bernard L. Madoff Investment Securities LLC’s financial statements in conformity with GAAS when, in fact, he performed no meaningful audits); SEC v. Savvides & Partners/PKF Cyprus, et al., Lit. Rel. No. 19622 (Mar. 22, 2006) (auditor failed to conduct basic audit procedures or maintain audit work papers). Further, the Commission has taken the broader view that the three subdivisions of Section 17(a) and Rule 10b-5 should be considered mutually supportive, rather than mutually exclusive. See In re John P. Flannery, 2014 WL 7145625 *12 & n.52, Rel. No. 3981 (Dec. 15, 2014) (Commission Opinion) (holding that primary liability under Rules 10b-5(a) and (c) and Section 17(a)(1) encompasses all “scienter-based, misstatement-related misconduct”). Establishing violations of Section 17(a)(1) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, requires proof of scienter. The scienter of an officer acting on its behalf may be imputed to a corporation. See, e.g., SEC v. Manor Nursing Ctrs., Inc., 458 F.2d 1082, 1096-97 nn.16-18 (2d Cir. 1972).
73. Johnson knowingly consented to the inclusion of his audit reports in Form S-1 registration statements of ADM and Legendary, filed pursuant to the Securities Act. Registration statements constitute offering documents disclosing material information, including financial information, concerning an offering of securities. Filed registration statements, even prior to effectiveness, are offering documents and may be used to “offer to sell” or “offer to buy” securities. Securities Act Section 5(c). Johnson’s audit reports in ADM and Legendary Form S-1 registration statements were in an offer to sell securities. Johnson’s audit reports were materially false, stating that the financial statements were audited in accordance with PCAOB standards, when they were not. Such false statements, knowingly made, in an offering of securities constitute a device, artifice or scheme to defraud, in violation of Section 17(a)(1). Accordingly, Johnson willfully violated Section 17(a)(1) of the Securities Act.
74. In administrative proceedings, the Commission may impose sanctions upon any person that is, was, or would be a cause of a violation, due to an act or omission the person knew or should have known would contribute to such violation. In order to establish that a person caused a violation, the Commission has specifically ruled that a showing of negligence will suffice. KPMG Peat Marwick LLP, 289 F.3d 109 (D.C. Cir. 2002) (negligence is sufficient to establish ‘causing’ liability under Exchange Act 21C” where the underlying violation is non-scienter based); see also Rita L. Schwartz, Exch. Act Rel. No. 42684, 2000 SEC LEXIS 737 (Apr. 13, 2000) (settled case) (“the Commission must prove that the person knew or should have known that such person’s inaction would contribute to the violation”). For willful aiding and abetting or causing liability, “”[a] finding of willfulness does not require an intent to violate, but merely an intent to do the act which constitutes a violation.” In the Matter of Anthony Fields CPA, Initial Decision Release No. 474, 2012 WL 6042354, at *8 (Dec. 5, 2012).
75. An issuer violates Section 13(a) of the Exchange Act, and Exchange Act Rule 13a-1, when such issuer of registered securities files with the Commission factually inaccurate annual reports. SEC v. IMC International,Inc., 384 F.Supp. 889, 893 (N.D. Texas), aff’d mem., 505 F.2d 733 (5th Cir 1974), cert. denied sub nom. An issuer violates these provisions if its filings contains materially false or misleading information. SEC v. Falstaff Brewing Corp., 629 F.2d 62, 72 (D.C. Cir. 1980). Scienter is not required for a violation of Section 13(a). SEC v. McNulty, 137 F.3d 732, 741 (2d Cir. 1998).
76. By not conducting his audits of the financial statements of the six aforementioned issuers in accordance with the PCAOB standards, Johnson willfully aided and abetted and caused those issuers to file annual reports with misleading financial statements, in violation of Section 13(a) and Rule 13a-1, in violation of Section 13(a) and Rule 13a-1.
77.	Johnson’s, numerous and repeated violations of auditing standards and his issuances of audit reports that falsely stated that he conducted his audits in accordance with the standards of PCAOB, when he had not, constituted “improper professional conduct” within the meaning of Exchange Act Section 4C(a)(2) and Rule 102(e)(1)(ii) of the Commission’s Rules of Practice (“CRP”). Further, in Johnson willfully violating Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5(b) thereunder, he also engaged in conduct that falls within the meaning of Exchange Act Section 4C(a)(3) and CRP Rule 102(e)(1)(iii). Exchange Act Section 4C(a) and CRP Rule 102(e)(1) authorize the Commission to institute administrative proceedings to determine whether a person has engaged in “improper professional conduct” or has willfully violated, or willfully aided and abetted and caused violations of, any provisions of the securities laws and rules issued thereunder, and censure or temporarily or permanently deny that person of the privilege of appearing or practicing before the Commission.
(2) repeated instances of unreasonable conduct, each resulting in a violation of applicable professional standards, that indicate a lack of competence to practice before the Commission.
79.	“Unreasonable conduct” as used in CRP Rule 102(e)(1)(iv)(B), means ordinary negligence. See In re Dohan & Co. CPA, et al., Int. Dec. Rel. No. 420, at p. 16 (June 27, 2011).
80. “The Commission defines recklessness under Rule 102(e) to be the same as recklessness under the antifraud provisions.... Thus, recklessness is ‘an extreme departure from the standards of ordinary care, . . . which presents a danger of misleading buyers or sellers that is either known to the [actor] or is so obvious that the actor must have been aware of it.” Amendment to Rule 102(e) of the Commission’s Rules of Practice, 63 Fed. Reg. 57164, 57167 (Oct. 26, 1998). It is “a lesser form of intent,” “not merely a heightened form of ordinary negligence.” Id. (internal citations and quotations omitted).
81. Johnson’s false representations in his audit reports that he had conducted the audits in accordance with PCAOB standards, when he had not, constituted extreme departure from the standards of ordinary care and presented a danger of misleading the public about the fair presentation, in all material respects, of the financial statements he had audited. Johnson failed to engage in any meaningful audit procedures and violated numerous auditing standards in his audits of the financial statements of the Eight Issuers. His audits were so deficient that they amounted to no audits at all. Accordingly, Johnson engaged in reckless “improper professional conduct” as an accountant within the meaning of CRP Rule 102(e)(1)(iv)(A).
82. Johnson failed to perform any audit procedures on the valuation of “derivative liabilities” in the financial statements of Monster, Primco and Valley High. Johnson failed to obtain sufficient evidence that the “tea bushes” recorded as a $750,000 asset in UMED’s financial statements, actually existed. These are but a few examples of Johnson’s numerous violations of auditing standards through negligence, if not willful or reckless disregard of the standards. The repeated instances of negligent conduct resulting in violations of auditing standards constitute “improper professional conduct” within the meaning of CRP Rule 102(e)(iv)(B) and shows Johnson’s lack of competence to practice before the Commission as an accountant.
83. Willful violations of Exchange Act Section 10(b) and Rule 10b-5(b) thereunder, Securities Act Section 17(a)(1) and Rule 2-02(b)(1) of Regulation S-X constitute conduct within the meaning of Exchange Act Section 4C(a)(3) and Rule 102(e)(1)(iii).
84. Based on the foregoing, the Commission finds that Johnson willfully violated Section 10(b) of the Exchange Act, Rule 10b-5(b) thereunder, Section 17(a)(1) of the Securities Act, and Regulation S-X Rule 2-02(b)(1).
85. Based on the foregoing, the Commission finds that Johnson willfully aided and abetted and caused violations of Section 13(a) of the Exchange Act, Rule 13a-1 thereunder.
86. Based on the foregoing, the Commission finds that Johnson engaged in improper professional conduct pursuant to Section 4C(a)(2) of the Exchange Act and Rule 102(e)(1)(ii) of the Commission’s Rules of Practice and conduct within the meaning of Exchange Act Section 4C(a)(3) and Rule 102(e)(1)(iii) of the Commission’s Rules of Practice.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondent Johnson’s Offer.
A. Respondent Johnson shall cease-and-desist from committing or causing any violation and any future violations of Sections 10(b) and 13(a) of the Exchange Act, Rules 10b-5(b) and 13a-1 promulgated thereunder; Section 17(a)(1) of the Securities Act; and Regulation S-X Rule 2-02(b)(1).
B. Respondent Johnson is denied the privilege of appearing or practicing before the Commission as an accountant.
C. Respondent Johnson shall pay disgorgement of $96,000, plus prejudgment interest thereon of $3,662.
D. Respondent Johnson shall pay a civil money penalty of $50,000.
3. $64,831, within 360 days of entry of this Order.
F. Payments by check or money order must be accompanied by a cover letter identifying Terry L. Johnson as a Respondent in these proceedings, and the file number of these proceedings. A copy of the cover letter and check or money order must be simultaneously sent to Gerald W. Hodgkins, Associate Director, Division of Enforcement, Securities and Exchange Commission, 100 F St., N.E., Washington, DC 20549.
G. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated as penalties paid to the government for all purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, he shall not argue that he is entitled to, nor shall he benefit by, offset or reduction of any award of compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in this action ("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty Offset, Respondent agrees that he shall, within 30 days after entry of a final order granting the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed in this proceeding. For purposes of this paragraph, a "Related Investor Action" means a private damages action brought against Respondent by or on behalf of one or more investors based on substantially the same facts as alleged in the Order instituted by the Commission in this proceeding.
H. It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and admitted by Respondent, and further, any debt for disgorgement, prejudgment interest, civil penalty or other amounts due by Respondent under this Order or any other judgment, order, consent order, decree or settlement agreement entered in connection with this proceeding, is a debt for the violation by Respondent of the federal securities laws or any regulation or order issued under such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. §523(a)(19).


text:
The adoption on 27 June 1981 of the African Charter on Human and Peoples' Rights (African Charter or Charter),  which anchors the African regional human rights system, was an important step towards the protection of human rights on the African continent. However, while the contribution of regional human rights systems in Europe and the Americas to the global system established under the auspices of the United Nations (UN) is widely accepted, this is not the case in respect of the African system.
Virtually all African states have been and continue to be the most egregious human rights violators, rendering human rights illusory in the daily lives of the majority of people in Africa. Changes in some African states have created room for optimism. One thinks here of movements towards democratisation and constitutionalism, such as those in South Africa, Malawi, Uganda and Namibia. However, generally human rights conditions remain critically precarious on the continent. Even within largely 'democratic' or 'liberal' African states, governments have acted and continue to act in ways antithetical to their international human rights obligations. This perennial state of affairs continues to illuminate the challenge of the African regional human rights system.
Doubts about the adequacy of the regional African human rights system are multi-faceted, surrounding not only the normative, but also the institutional and procedural aspects of the African Charter.  The Charter may be applauded for its significant contribution to the human rights corpus, including its codification of all three categories of rights,  the innovative concept of peoples' rights,  the imposition of duties on individuals,  but even these and other aspects raise various controversies. For instance, commentators point to 'claw-back' clauses as undermining or watering down the contents of the rights, saying that they invest states with unfettered powers to restrict human rights.  Other commentators point to the potential abuse of the language in which duties are phrased.
The African Commission started off cautiously and continues to face several challenges. Over time it has become an important instrument for the promotion and protection of human rights in Africa. In analysing the functioning of the Commission, this article disagrees with those advocating its abolition, and supports relentless efforts to strengthen it and the African system as a whole. The article evaluates the functioning of the African Commission with regard to the examination of state reports, and assesses the role of this function in the promotion of human rights in Africa. It identifies factors inhibiting the effectiveness of state reporting and presents proposals for improving the system of examining state reports.
Under article 62 of the African Charter states are obliged to submit biennial reports on legislative and other measures they adopted in order to give effect to the provisions of the Charter. These reports are presented to the Commission for examination.
A member of the African Commission is assigned as 'special rapporteur' with respect to the state whose report is to be examined. The special rapporteur usually drafts the questions to be asked.
These questions are then sent to the state before the report is considered.
At the session, the chairperson or the special rapporteur initiates the report's examination proceedings.
Thereafter, the state's representative introduces the report.
This is followed by observations and questions of the special rapporteur.
Other members of the African Commission also address questions and observations to the state representative.
The state representative is granted an opportunity to prepare a response.
After the response from the state representative, the African Commission summarises the proceedings and usually a note of thanks is made to the state representative.
[i]s a non-contentious and non-judgmental proceeding allowing states to present a comprehensive picture of the human rights situation in a country and engage in constructive dialogue with the Commission with a view to assist states to enhance their human rights standards.
Through this dialogue the difficulties to the realisation of human rights and possible ways to address them are identified.  Thus, states benefit from advice on how to improve their human rights situation from independent international experts.
enable the Commission and the state party to facilitate the exchange of information among states to develop a better understanding of the common problems faced by states and a fuller appreciation of the possible measures to be taken to promote the effective realisation of each of the rights contained in the Covenant.
Through the reporting system the implementation of the African Charter by states within their domestic systems is monitored. Through the examination of state reports, the African Commission is afforded the opportunity to understand the problems encountered by states in transforming the Charter into reality, and the Commission may make recommendations which may be taken by states to address the problems and promote effective realisation.
The reporting system enables states to constantly check the whole government machinery as it requires all relevant government institutions and departments to evaluate legal regulations, procedures and practices in terms of the provisions of the Charter.
State reporting permits the African Commission to collect information on common experiences, both good and bad, from state parties so that states may learn from each other.
On the basis of the above, states should be honest in their reporting, presenting the true picture of their human rights situation in order to benefit from the good offices of the African Commission.
The initial guidelines have shortcomings, but they may be credited for clarifying some ambiguous provisions of the African Charter, and for deepening normative understanding thereof. For instance, while the Charter has no derogation clause, the guidelines require states to report on whether there is a provision in their laws for derogation and under what circumstances derogations are possible.  Moreover, the guidelines are detailed on the information states must furnish to demonstrate that they have taken appropriate measures to give effect to individual and group rights, thereby deepening the normative understanding on the scope of these rights and the obligations of states. For instance, as regards peoples' rights to equality under article 19, the guidelines require states to state the constitutional framework which protects the different sections of national community.  Thus, to comply with the African Charter, states are under an bligation to proscribe tendencies of some sections of the community dominating others.
In reporting on the right to self-determination in article 20, states are required to provide information on legislative and administrative machinery ensuring that all communities are allowed full participation in political activities and equal opportunities in the economic activities of their country.  Thus, independent African states are to guarantee the right to self-determination. Denying certain communities the right to participate in the political or economic activities of the country amounts to oppression and violates the right to self-determination.
Guideline III (11), dealing with reporting on peoples' right to a satisfactory environment, amplifies the provisions of article 24. Guideline III (11) provides that the aims of article 24 are to protect the environment and keep it favourable for development (thereby incorporating the concept of sustainable development in environmental protection); to establish a system to monitor effective disposal of waste in order to prevent pollution and to obligate nations to co-operate to prohibit and penalise disposal of waste on African soil by any company. The guideline further defines the obligation of state parties by requiring them to furnish certain information in their initial and periodical reports.
Since its 9th session in March 1991, when it considered the reports of Libya, Rwanda and Tunisia, up to the end of its 25th session in April 1999, the African Commission has had occasion to examine reports of 21 countries.
The Commission has had opportunity to address various human rights issues affecting different African countries.  The examination of state reports has served as a forum for wide-ranging discussions that give a valuable indication on how the African Commission gives normative understanding to the African Charter through interpretation of its provisions.
Infrequent and inadequate reporting by states, however, has undermined the role of reporting in realising human rights in Africa. A decade since the Charter took effect in respect of the majority of state parties, only 24 of the 53 state parties to the Charter had submitted reports; only four states had submitted second reports and only Zimbabwe had submitted a third report. No state had submitted a fourth report. Many state parties had not yet submitted their first reports which were long overdue.  By the 25th session, there were over 200 state reports due.
Partly because of the failure to submit reports, the African Commission has not fully succeeded in enhancing the protection and promotion of human rights through the examination of state reports. Reasons for the lack of compliance by states with their reporting obligations include a general lack of political will on the part of state parties; secondly the fact that state parties have to file reports under other international human rights instruments to which they are signatories; and thirdly the lack of a co-ordinated effort between state departments and the complexity of the first reporting guidelines issued by the African Commission.
The African Commission does not issue 'concluding comments' or a 'concluding evaluation' of state reports. Individual commissioners express views in the course of examining state reports but no uniform position is taken by the Commission on the various issues raised. The examination of state reports usually ends with profuse thanks or encouragement to the state representative. The Commission does not adequately advise state parties on how to improve their human rights situations.  The Commission needs to remedy these anomalies in order to enhance the impact of the state reporting procedure in protecting and promoting human rights in Africa.
State reporting under the African system is essential to the promotion and protection of human rights, but its effectiveness is undermined by several factors which need to be remedied. While the first guidelines for state reporting played an important role, they were deficient in some respects.
The guidelines were too detailed, lengthy and in some areas repetitive and unnecessarily complex. Additionally, the first guidelines were not arranged in a logical and coherent manner. The simplified guidelines follow a more logical sequence and more clearly provide for state parties to report on each right and duty enshrined in the African Charter. Furthermore, as regards racial and gender discrimination, while the first guidelines should be commended for drawing inspiration from similar guidelines adopted by the UN organs under the UN Convention Against Racial Discrimination (CERD) and the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW), the simplified guidelines are quite precise in requiring states to report on actions they have taken to protect vulnerable groups. With regard to women, state parties should comprehensively report on the predicaments that afflict women on the continent, including female genital mutilation, domestic violence and the abuse of widows.
In the course of examining state reports, the African Commission should avoid spending too much time on technical issues and be decisive on issues. For instance, whether or not a state representative must attend the session when a state's report is examined, is an issue that has in the past caused the postponement of examination of state reports.  This issue has remained unresolved. The issue of the suitability of the representative (whether he or she should possess technical legal expertise) has also caused delays and confusion, and the Commission has not yet decisively resolved these.  The Commission should not require specific qualifications of state representatives and may proceed to consider a state's report in the absence of its representative to avoid a backlog of reports. The Commission should then send its comments to the state and require a state's response on unanswered issues.
The frequent non-attendance of government representatives causing the examination of state reports to be postponed, and at times the non-attendance of commissioners assigned as rapporteurs in respect of the state reports leading to a waste of time while looking for substitutes, are creating a backlog.  The limited time available to the commissioners at each session, coupled with delays arising from the failure of the Secretariat to translate the reports in all the official languages of the Commission, aggravate the situation.  The Commission should fight these problems relentlessly.
The benefits of the state reporting procedure may be enhanced by affording sufficient time to the examination of each report. Compared to other international human rights bodies, the African Commission disposes of reports very quickly, initially in approximately 45 minutes.  The Commission has made efforts to remedy this, but more needs to be done to allow state representatives adequate time to respond.  On several occasions, the practice pursued by the Commission is one of asking a series of questions to the representative, followed by 'a statement in defence' of the report.  The danger is that the representatives will not be able to give definite answers to each of the questions, and may omit pertinent issues. A question-answer approach should be adopted.
Moreover, the African Commission may enhance the impact of the state reporting mechanism by frequently referring to the information presented to it by non-governmental organisations (NGOs) as well as alternate reports. NGOs should not only participate in the processes of preparing state reports, but should also be encouraged to supplement these reports, thereby providing the Commission with additional information. They should also be present at the examination of state reports. The fact that states are aware that NGOs are present and ready to furnish the Commission with information may check dishonest or incomplete state reporting, besides putting pressure on states to remedy violations to avoid embarrassment before the Commission. The Commission has only so far to a very limited extent taken cognisance of alternate reports.
The Commission should also create a follow-up mechanism to deal with unanswered queries or unsatisfactorily answered questions by state representatives during the examination of state reports. A follow-up is possible if the Commission issues concluding comments and if NGOs are encouraged to monitor how state parties implement these recommendations in practice.
Infrequent reporting by state parties has also limited the role of state reporting. The African Commission may deal with non-co-operative states through the appointment of special rapporteurs to investigate the human rights situation in countries and make recommendations on how to improve them. In addition, the Commission may request state parties with overdue reports to submit reports presented to UN treaty bodies, examine them and seek clarification or supplementary reports where necessary. The use of special rapporteurs may not only invigorate state reporting, but may also serve as an alternative to state reporting. In addition, they also play an important protective function.
The African Commission has in the past relied on article 46 of the African Charter  to appoint special rapporteurs and carry out on-site missions to state parties, but this system needs strengthening. While the use of special rapporteurs in the African system is not yet fully developed, and is hindered by financial constraints,  it constitutes an important method for the protection of human rights. Special rapporteurs in the African system seem to have wide mandates,  although they may be inhibited by restrictions on publicity.
Owing to challenges facing the above mechanisms, especially the lack of sufficient funding, the African Commission may wish to consider adopting the so-called 'review of implementation' 58 procedure even in the absence of a state report. Under this procedure, the Commission obtains independent information such as from NGOs, reports submitted by that country to UN bodies and their comments, about the implementation of the African Charter by the state in question. Thereafter, a state representative is invited for a dialogue with the Commission. These proactive methodologies have the potential of dealing adequately with state parties that fail to submit reports.
The examination of state reports by the African Commission has the potential of enhancing respect for human rights in Africa. The Commission has undertaken issue-analysis and deepened the normative understanding of the African Charter through its guidelines to state reporting, but several problems continue to inhibit the effectiveness of state reporting. These problems need to be addressed to improve the system of state reporting rather than abandoning the system in its entirety. The Commission's regular reviews of the enforcement of human rights in countries are essential in encouraging states to carry out self-examination and in enabling it to scrutinise reports to determine state compliance with the African Charter.
State reporting may enable the Commission to offer advice to states on how to improve their human rights situations. Moreover, states not complying with the Charter may be exposed to international embarrassment. The presence of NGOs at the examination of state reports and their alternate reports may help to put pressure on state parties not to make misrepresentations in their reports. State parties may take steps to remedy violations to avoid international embarrassment.
Efforts are needed, however, to encourage states to file their reports regularly. There is also a need for the Commission to enhance its role by issuing concluding comments. If at the end of examining each state's report, concluding comments and recommendations are made in respect of areas for improvement, when the Commission next considers a report of that country, these comments and recommendations could provide the basis upon which to evaluate a state's efforts, if any, to improve its human rights record. Thus, concluding comments and recommendations may play a vital role in the Commission's follow-up efforts.
With improved state reporting, a backlog of unexamined state reports may aggravate the situation over time. The African Commission needs to establish procedures to deal with such backlogs. As noted above, the Commission should proceed to consider a state's report in the absence of its representative to avoid backlog of reports. The Commission should then send its comments to the state and requiring a state's response on unanswered issues. Because the Commission also deals with individual communications, which may reduce the time available to state reports, it needs to adopt procedures that dispose of communications expeditiously.
 Adopted by the Eighteenth Assembly of Heads of State and Government of the Organisation of African Unity (OAU) at Nairobi, Kenya and entered into force on 21 October 1986, OAU Doc CAB/LEG/67/3/Rev 5 (1981), reprinted in (1982) 21 International Legal Materials 52 and I Brownlie (ed) Basic documents on human rights (1992) 551. The Charter has been ratified by all the OAU's 53 member states, the last to ratify being Eritrea.
 See generally H Steiner & P Alston International human rights in context: Law, politics and morals (1996) 689; M Mutua 'The Banjul Charter and the African cultural fingerprint: An evaluation of the language of duties' (1995) 35 Virginia Journal of International Law 339; J Oloka-Onyango 'Beyond the rhetoric: Reinvigorating the struggle for social and economic rights in Africa' (1995) 26 California Western International Law Journal 1; P Amoah 'The African Charter on Human and Peoples' Rights - An effective weapon for human rights?' (1992) 4 African Journal of International and Comparative Law 226; CE Welch 'The African Commission on Human and Peoples' Rights: A five-year report and assessment' (1992) 14 Human Rights Quarterly 43.
 The Charter brings together the three dimensions of human rights under one roof, namely, civil and political rights, economic, social and cultural rights and 'peoples' rights', sometimes also called collective or solidarity rights.
 These are rights which an individual can only enjoy in a collective sense, as a member of the community. See W Benedek 'The rights of peoples: The main issues' (1991) 16(56) Bulletin of Australian Society of Legal Philosophy 71-79; RN Kiwanuka 'The meaning of 'peoples' in the African Charter on Human and Peoples' Rights' (1988) 82 American Journal of International Law 80. Under the Charter, peoples' rights include: equality of all peoples (art 19); the right of all peoples to existence and to self- determination (art 20); the right to permanent sovereignty over wealth and natural resources (art 21); the right to development (art 22); the right to peace and security (art 23); and the right to a general satisfactory environment (art 24).
 These duties are towards his or her family and society, the state and the international community. See African Charter arts 27-29.
 A prima facie interpretation of the claw-backs clauses may mean that the guarantees in the Charter are subject or equated to the domestic law of states parties. See F Viljoen 'Review of the African Commission on Human and Peoples' Rights: 21 October 1986 to 1 January 1997' in C Heyns (ed) Human rights law in Africa 1997 (1999) 50. Also, it may mean that the content of domestic laws restricting the rights may not be impugned. State parties are given more or less unlimited powers to determine the nature and extent of the limitations to the rights as distinguished from both the European and American human rights instruments which require states to limit rights as necessary in a democratic society. See arts 8-11 of the European Convention on Human Rights and arts 15 & 16 of the American Convention of Human Rights. The jurisprudence of the African Commission rejects the notion that states have unfettered powers to limit the rights in the Charter. The Commission has clarified te implications of claw-back clauses in the Charter, more specifically with respect to the right to freedom of association in art 10(1) of the Charter. Under this article, the right to freely associate is conditional on the requirement that one abides by the 'law' enacted by the states. Without defining the standards such domestic law must conform to, the clause may be interpreted as conferring unfettered powers on states to infract the right to free association. The Commission, however, has rejected this interpretation. In its resolution on the right to associate (adopted at its 11th session), the Commission calls on states not to 'enact provisions which would limit the exercise of this right'. The resolution stresses that states' regulation of the right to associate should be consistent with their obligations under the Charter. It follows that no-party or single-party regimes are infractions of the freedom of political association, assembly and speech. Through the communications procedure, the Commission has also strictly interpreted limitations to rights. In Communication 103/93, Alhassan Abubakar v Ghana, Tenth Annual Activity Report, the Commission strictly construed the claw-back clause in art 6, holding that a state is not absolved from liability by merely stating in general terms that the complainant violated some law and was arrested and detained under such law without providing substantive information to support such allegations.
 See generally R Gittleman 'The African Charter on Human and Peoples' Rights: A legal analysis' (1982) 22 Virginia Journal of International Law 667. For an extensive justification for the rights-duties conception, see generally Mutua (n 2 above).
 Art 30 of the African Charter. The Commission was inaugurated on 2 November 1987. See Second Annual Activity Report of the African Commission on Human and Peoples' Rights para 4.
 For instance, the Commission is not conferred with the power to enforce its decisions. Under art 59, the Assembly of Heads of State and Government may veto the findings of the Commission. The Charter is silent on whether or not the Commission's decisions are binding, prompting some analysts to argue that they are declaratory and recommendatory in nature. See eg G Naldi & K Magliveras 'Reinforcing the African system of human rights: The Protocol on the Establishment of a Regional Court of Human and Peoples' Rights' (1998) 16 Netherlands Quarterly of Human Rights 431 432; M Mutua 'The African Human Rights Court: A two-legged stool?' (1999) 21 Human Rights Quarterly 342 348. The Commission's decisions possess legal significance, and states should comply with them in good faith on the basis of the international law principle of pacta sunt servanda. But the absence of an explicit provision on the powers of the Commission to issue binding and enforceable judgements means that compliace with the Commission's decisions depends more on the good faith of the state in question. The Commission's protective mandate includes adjudication of both inter-state (arts 47-54) and individual communications (art 55). Individual communications are essential in redressing violations, but many states do not co-operate in enforcing the Commission's findings. See IAB El-Sheikh 'Draft Protocol to the African Charter on Human and Peoples' Rights on the Establishment of an African Court on Human and Peoples' Rights' (1997) 9 African Journal of International and Comparative Law 943 945. Through activism and creativity, the Commission has sought to address these limitations, but its effectiveness is still hindered by the above factors. The activism and creativity of the Commission includes: enhancing publicity of the Commission's work beyond the fetters of art 59 of the Charter; interaction and partnership with non- governmental organisations (NGOs) both local and international; augmenting the Commision's protective mandate by adjudicating cases alleging also isolated and not only massive violations of human rights; flexibility towards admissibility requirements laid down in art 56 of the Charter; drawing upon international human rights law; strictly construing claw-back clauses; appointment of special rapporteurs and carrying out on-site visits to states parties; recommending remedies for violations of the rights in the Charter; and attempts by the Commission to carry out follow-ups of its decisions. See generally GW Mugwanya 'Realising universal human rights norms through regional human rights systems: Reinvigorating the African system' (1999) 10 Indiana International and Comparative Law Review 34 43-45; Viljoen (n 6 above) 54.
 Arts 47 & 55 African Charter.
 The American Convention on Human Rights (1969) and European Convention for the Protection of Human Rights and Fundamental Freedoms (1950) do not require states to submit regular reports, but various UN human rights instruments requires states to submit regular reports, and mandate specific organs to deal with these reports. See generally T Buergenthal International human rights in a nutshell (1995) 21-247; P Alston 'Critical appraisal of the UN human rights regime' in P Alston (ed) The United Nations and human rights: A critical appraisal (1992) 1.
 Some analysts argue that the omission was intentional, so as not to jeopardise ratification. See eg CE Welch Protecting human rights in Africa (1995) 154; Viljoen (n 6 above) 56.
 First Annual Activity Report of the Commission (1987—1988) 28.
 Second Annual Activity Report of the Commission (1998—1989) 20.
 Viljoen (n 6 above) 95—96; F Viljoen 'State reporting under the African Charter on Human and Peoples' Rights: A boost from the South' (2000) 44 Journal of African Law 110; E Ankumah The African Commission on Human and Peoples' Rights: Practice and procedure (1996) 90-107; Danish Centre for Human Rights The African Commission on Human and Peoples' Rights Examination of state reports: Egypt and Tanzania (11th session) (1995) 7.
 R Murray 'Report on the 1997 sessions of the African Commission on Human and Peoples' Rights — 21st and 22nd sessions: 15—25 April and 2—11 November 1997' (1998) 19 Human Rights Law Journal 181.
 The African Commission on Human and Peoples' Rights State reporting procedures Information Sheet 4 5—7.
 Committee on Economic, Social and Cultural Rights: Report on the 3rd session (6-24 Feb 1989) UN Doc E/1989/22 165—185.
 The African Commission on Human and Peoples' Rights State reporting procedure Information Sheet No 4 6—7.
 Guidelines on national periodic reports, Second Annual Activity Report of the African Commission on Human and Peoples' Rights Annex XII. These guidelines are reprinted in G Naldi Documents of the Organisation of African Unity (1992) 155. After serious debates over these guidelines, the Commission adopted the simplified guidelines as summarised below. See Viljoen (n 19 above) 111—113.
 Ankumah (n 19 above) 82.
 See generally Viljoen (n 19 above) 112—113.
 Guideline II 4(i). However, without laying down detail as to what standards states must conform to when they derogate from their obligations or the circumstances that must exist before derogations are made, this reporting requirement is inadequate.
 Guideline III (11) & (14).
 See generally Ankumah (n 19 above) 79—109; Viljoen (n 6 above) 91—102.
 These states are Botswana, Burkina Faso, Central African Republic, Cameroon, Chad, Comoros, Congo, Côte d'Ivoire, Djibouti, Democratic Republic of Congo, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritius, Namibia, Niger, Sahrawi Arab Democratic Republic, Sao Tomé and Principe, Sierra Leone, Somalia, Swaziland, Tanzania, and Zambia. See Eleventh Annual Activity Report of the African Commission on Human and Peoples' Rights Annex II (Status of Submission of State Reports) 68th ordinary session of the OAU Council of Ministers 1-6 June 1998 CM/208 (LXVIII). For a summary of the status on submission of state periodical reports under art 62 of the Charter between March 1987 to the 21st session of the Commission, 15-25 April 1997, see Viljoen (n 6 above) 92-94; Murray (n above) 181-184. At the 21st session, the Commission examined the initial report for Sudan, and combined the second and third reports of Zimbabwe. For a summary f the status on submission of state periodic reports under art 62 of the Charter as at the 25th session, see Annex III, Twelfth Annual Activity Report of the African Commission on Human and Peoples' Rights, 24th and 25th ordinary sessions, 26 April to 5 May 1999, Banjul, The Gambia, http://www1.umn.edu/humanrts/ africa/12thannex3.html (accessed 4 August 01).
 Viljoen (n 6 above) 95.
 Viljoen (n 6 above) 95. See also Ankumah (n 19 above) 90—107.
 In examining South Africa's report, the set of questions prepared by the African Commission's rapporteur, Commissioner Rezzag-Bara, as well as information supplied to the Commission by South African NGOs, enabled the Commission to identify several issues affecting South Africa's human rights regime, including the status quo of the African Charter in South Africa's legal system, the role of customary law and its relation to human rights, realising 'compulsory' education when this education is not free, the independence of the Independent Electoral Commission, the funding of political parties, the effectiveness of the National Crime Prevention Strategy, police brutality, measures to reduce the number of trail-awaiting prisoners, the role of victims in the administration of justice, the role and powers of the Council of Traditional Rulers, the structure of the legal profession and the rationalisation of courts. Ideally the Commission should have advised South Africa on these issues by aopting concluding comments or concluding views. See generally Viljoen (n 19 above) 110. Initially the UN Human Rights Committee examining reports under art 40 of the ICCPR used not to adopt concluding comments or concluding views about state reports, but from 1992 it changed this practice to issue Agreed Final Comments at the conclusion of the consideration of each report. These comments also contain recommendations to the state on the possible actions to take to improve its compliance with human rights obligations under the Covenant. According to the Committee, Agreed Final Comments serve the following purposes: (a) to make each state's experience available for the benefit of all state parties in order to promote their further implementation of the Covenant; (b) to draw their attention to insufficiencies disclosed by a large number of reports; (c) to suggest improvements in the reporting procedure and to stimulate the activities of these states and international organisation in the promotion and protection of human rights. See Report of the Human Rights Committee A/36/40 107.
 Such as those of Nigeria and Benin. See Viljoen (n 6 above) 98.
 Viljoen (n 6 above) 98.
 Viljoen (n 6 above) 100.
 Viljoen (n 6 above) 102.
 The UN Human Rights Committee usually allows state representatives a day to prepare replies. See M O'Flaherty 'The reporting obligations under article 40 of the International Covenant on Civil and Political Rights: Lessons to be learned from the consideration by the Human Rights Committee of Ireland's first report' (1994) 16 Human Rights Quarterly 515 517.
 For instance, this issue arose in the Commission's examination of the reports of The Gambia and Senegal at the Commission's 12th session, and one commissioner, Beye, emphasised that he was personally opposed to the death penalty. See Viljoen (n 6 above) 106.
 These are some of the issues for instance that arose in the Commission's examination of The Gambia's second report at the Commission's 16th session. See generally African Society of International and Comparative Law Report on the 16th Session (1996) 36—42.
 Art 46 of the African Charter mandates the Commission to resort to any appropriate means of investigation.
 The Commission relies on funding from NGOs and other institutions. See Ninth Annual Activity Report 7.
 For instance, the mandates of both the Special Rapporteur on Extrajudicial or Arbitrary Executions and the Special Rapporteur on Prisons and Conditions of Detention encompass taking preventive measures and also promoting state compliance with international human rights norms and standards. See Report on Extra-Judicial, Summary or Arbitrary Executions (by Hatem Ben Salem, Special Rapporteur) Tenth Annual Activity Report Annex VI, and Report of the Special Rapporteur on Prisons and Conditions of Detention to the 21st Session of the African Commission on Human and Peoples' Rights Tenth Annual Activity Report, as above, Annex VII. At the 22nd session, the Special Rapporteur on Extrajudicial or Arbitrary Executions reported, among others, his attempt to intervene on behalf of an individual in the Comoros. The Comoros, however, executed the individual. He also reported on his futile request to the UN Commissioner for Human Rights, asking that the Special Rapporteur of the African Commissionbe part of the mission of the UN Committee investigating executions in Zaïre. See generally Murray (n 20 above) 176. Although these attempts were futile, they demonstrate the role the African system can play. There is a need to widely publicise states' non-compliance as this may serve as a shame and may pressure states into compliance.
 Report of the Mission to Mauritania of the African Commission on Human and Peoples' Rights 19—27 June 1996, Tenth Annual Activity Report, Annex IX.
 As above. It was further stressed by the head of the mission that the goal was not to decide whether what was encountered was wrong or right, but above all to listen to all sides with the objective of bringing clarification to the Commission in its contribution to the search for an equitable solution through dialogue.
 See generally Viljoen (n 6 above) 60; D Shelton 'The promise of regional human rights systems' in BH Weston & SP Marks (eds) The future of international human rights (1999) 385.
 Shelton (n 55 above) 385.
 Viljoen (n 6 above) 61.
 Viljoen (n 19 above) 117.

matches:
art 10
art 6
Art 30
art 59
art 59
art 56
art 62
art 62
art 40
Art 46