PKF International’s Cypriot member firm has agreed to pay more
than $260,000 to settle allegations it engaged in fraud in
connection with its 1999 and 2000 audits of software company
AremisSoft Corporation.

In March 2006, the US Securities and Exchange Commission (SEC)
filed a complaint that alleged Savvides & Partners/PKF Cyprus
(PKF Cyprus) issued audit reports for AremisSoft subsidiaries in
1999 and 2000 signed by former partner Pavlos Meletiou that falsely
stated its audits were conducted in accordance with US Generally
Accepted Auditing Standards (GAAS) and that the subsidiaries’
financial statements were fairly presented in accordance with US
GAAP. Meletiou was also named as a defendant in the

The allegedly false financial statements of the subsidiaries were
included as part of AremisSoft’s consolidated financial statements
filed by the software company with the SEC in 1999 and 2000 and in
its SEC registration statements. The complaint also alleged that
the PKF Cyprus audit work papers prepared by Meletiou during the
2000 audits of two AremisSoft subsidiaries included false customer
and bank confirmations.

The complaint further alleges that Meletiou attended meetings with
senior AremisSoft executives in which the AremisSoft financial
fraud was openly discussed.

The $261,565 settlement comprises the $106,513 PKF Cyprus received
in audit fees from AremisSoft, $48,539 in prejudgment interest and
a civil money penalty of $106,513. PKF Cyprus agreed to the
settlement without admitting or denying the allegations in the SEC

The settlement, which is subject to court approval, would
permanently enjoin PKF Cyprus from violating or aiding and abetting
violations of the anti-fraud, reporting, books and records and
internal controls provisions of the US federal securities

PKF Cyprus has also consented to an administrative order that
suspends it from appearing or practising before the SEC. The firm
can apply for reinstatement with the SEC after five years. PKF
Cyprus is a 10-partner firm with 120 staff.