UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 98030 / August 1, 2023

ACCOUNTING AND AUDITING ENFORCEMENT

Release No. 4433 / August 1, 2023

ADMINISTRATIVE PROCEEDING

File No. 3-21539

In the Matter of

JOHN R. BROWNE, CPA, 

Respondent.

ORDER INSTITUTING PUBLIC

ADMINISTRATIVE AND CEASEAND-DESIST PROCEEDINGS PURSUANT TO 

SECTIONS 4C AND 21C OF THE 

SECURITIES EXCHANGE ACT OF 1934 AND 

RULE 102(e) OF THE COMMISSION’S 

RULES OF PRACTICE, MAKING FINDINGS, 

AND IMPOSING REMEDIAL SANCTIONS 

AND A CEASE-AND-DESIST ORDER

I.

The Securities and Exchange Commission (“Commission” or “SEC”) deems it appropriate

that public administrative and cease-and-desist proceedings be, and hereby are, instituted against 

John R. Browne, CPA (“Respondent” or “Browne”) pursuant to Sections 4C1 and 21C of the 

Securities Exchange Act of 1934 (“Exchange Act”) and Rule 102(e)(1)(ii) of the Commission’s 

Rules of Practice.2

 

1 Section 4C provides, in relevant part, that: 

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 issued thereunder.

2 Rule 102(e)(1)(ii) provides, in pertinent part, that:

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.
2

II.

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 Instituting Public Adminstrative and Cease-and-Desist Proceedings Pursuant to Section 4C 

and 21C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission’s Rules of 

Practice, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order

(“Order”), as set forth below. 

III.

On the basis of this Order and Respondent’s Offer, the Commission finds3that: 

A. SUMMARY

1. These proceedings arise out of improper professional conduct by John R. Browne, a 

certified public accountant (“CPA”), in connection with the audit of MusclePharm Corporation’s 

(“MusclePharm”) financial statements for its fiscal year (“FY”) ended December 31, 2017, and the 

quarterly reviews for the first three quarters of 2018 (collectively, the “relevant reporting periods”). 

Browne was the engagement partner for the two accounting firms performing the MusclePharm 

audit and quarterly review work during the relevant reporting periods, “Audit Firm 1” and “Audit 

Firm 2.”

2. During the relevant reporting periods, MusclePharm (1) prematurely recognized 

revenues on sales where delivery had not yet occurred and (2) improperly classified certain 

marketing-related customer credits as operating expenses rather than reductions to revenue. On 

August 24, 2020, MusclePharm restated its financial statements for the relevant reporting periods 

to, among other things, adjust for material overstatements of net revenue and gross profit resulting 

from these, and other, accounting errors. 

3. Browne failed to appropriately audit these accounting areas by, among other things, 

failing to act upon red flags in the working papers he reviewed that showed that MusclePharm’s 

practices for recording and valuing revenue were not in accordance with generally accepted 

accounting principles (“GAAP”) or its own public disclosures. 

4. As a result, Browne’s conduct departed from multiple auditing standards, including 

failing to: exercise due professional care; properly supervise the audit engagement; gain an 

understanding of key aspects of MusclePharm’s business; plan the audit based on assessed risks; 

 

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.
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obtain sufficient appropriate audit evidence; properly evaluate audit results; and adequately 

document the audit work. Nor did Browne’s conduct adhere to the professional standards for the 

review of interim financial information for the first three quarters of 2018.

B. RESPONDENT

5. John R. Browne, CPA, 57, resides in Lakewood, Colorado. Browne was a partner 

at Audit Firm 2 until his retirement from the firm in June 2023, and, before that, he was a partner at 

Audit Firm 1. Browne served as the engagement partner for the MusclePharm audit and quarterly 

review work for each of the relevant reporting periods. Browne joined the MusclePharm 

engagement team in 2016 as the engagement quality reviewer. Although he is not currently 

employed, Browne is a CPA licensed in Colorado since 1995. 

C. OTHER RELEVANT ENTITIES

6. MusclePharm Corporation is a Nevada corporation with its principal place of 

business in Las Vegas, Nevada, that develops, markets, and distributes branded nutritional 

supplements. MusclePharm’s securities are registered pursuant to Section 12(g) of the Exchange 

Act and traded on OTC Link, operated by OTC Markets Group Inc., under the symbol “MSLPQ.” 

In 2015, MusclePharm was charged by the Commission in a settled cease-and-desist order for 

violations of the Securities Act of 1933 (“Securities Act”) and the Exchange Act. See In the Matter 

of MusclePharm Corp., Securities Act Rel. No. 9903 (Sept. 8, 2015) (the “2015 SEC Order”). 

MusclePharm filed for Chapter 11 bankruptcy protection on December 15, 2022.

7. Audit Firm 1 was, prior to October 2018, a Public Company Accounting Oversight 

Board (“PCAOB”)-registered accounting and auditing firm. Audit Firm 1 became MusclePharm’s 

external auditor of record in 2013, and served in that capacity for FY 2017 and the first two 

quarters of 2018 (“Q1 2018” and “Q2 2018”). 

8. Audit Firm 2 is a PCAOB-registered accounting and auditing firm. In October 

2018, Audit Firm 2 acquired Audit Firm 1’s business. After the acquisition, Audit Firm 2 

continued to serve as MusclePharm’s external auditor for the third quarter of 2018 (“Q3 2018”). 

Audit Firm 2 resigned as MusclePharm’s auditor in May 2019 without completing the FY 2018 

audit.

D. FACTS

Background

9. During Audit Firm 2’s audit of MusclePharm’s FY 2018 financial statements, Audit 

Firm 2 discovered accounting errors impacting the last two quarters of 2018. The errors were due 

to MusclePharm recognizing revenue on inventory that was temporarily stored off-site in trailers 

and not disclosed to Audit Firm 2 during the year-end inventory count. Browne informed 

MusclePharm’s audit committee of these errors. As a result, MusclePharm’s audit committee 
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commenced an internal investigation and, on March 14, 2019, MusclePharm filed a Form 8-K, 

Item 4.02, notice of non-reliance on its previously issued financial statements for Q3 2018. 

10. In May 2019, Audit Firm 2 resigned and Browne advised MusclePharm’s audit 

committee that (i) the internal controls necessary for MusclePharm to develop reliable financial 

statements do not exist, and (ii) information has come to Audit Firm 2’s attention that (1) has made 

it unwilling to be associated with the financial statements prepared by MusclePharm’s 

management because of multiple material weaknesses in internal control over financial reporting, 

extraordinary attempts to mislead the Audit Firm 2 engagement team and allegations of 

noncompliance with laws and regulations, (2) if further investigated, may materially impact the 

fairness or reliability of the financial statements for the year ended December 31, 2018, or cause 

Audit Firm 2 to be unwilling to be associated with MusclePharm’s financial statements and (3) it 

has concluded materially impacts the reliability of previously issued financial statements for 2018. 

11. Thereafter, MusclePharm retained another auditing firm (“Audit Firm 3”), which 

performed extensive audit procedures that identified a number of additional accounting errors 

impacting earlier reporting periods, including (1) improper sales cutoff and (2) the 

misclassification of marketing-related customer credits. As a result of these and other accounting 

errors, MusclePharm subsequently filed a Form 10-K for FY 2019 that included unaudited restated 

financial statements not only for Q3 2018, but also FY 2017 and the first two quarters of FY 2018. 

MusclePharm’s Improper Sales Cutoff

12. During the relevant reporting periods, MusclePharm improperly accelerated 

revenue by, among other things, recognizing sales upon shipment for certain customers that had 

free on board (“FOB”) destination terms, meaning that risk of loss had not transferred and delivery 

had not occurred until the MusclePharm goods were received and accepted by the customer at the 

customer’s location. This practice was inconsistent with GAAP and the company’s revenue 

recognition policy, which stated that MusclePharm recognized revenue when title and risk of loss 

had transferred. See Financial Accounting Standards Board Accounting Standards Codification

(“ASC”) 605-10-25-1 (for FY 2017); ASC 606-10-25-30 (for Q1-Q3 2018). As a result, 

MusclePharm prematurely recognized revenue for each of the relevant reporting periods, totaling 

approximately $3.3 million in FY 2017, $3.0 million in Q1 2018, $3.5 million in Q2 2018, and 

$3.0 million in Q3 2018.

MusclePharm’s Misclassification of Marketing-Related Customer Credits

13. During the relevant reporting periods, MusclePharm also improperly accounted for 

certain marketing-related customer credits as expenses instead of reductions to revenue, which led 

to an overstatement of MusclePharm’s net revenue. Under GAAP, consideration given by a vendor 

to a customer is accounted for as a reduction to revenue, absent evidence of (1) an identifiable 

benefit in exchange for the consideration and (2) a reasonable estimate of fair value of the 

identifiable benefit. See ASC 605-50-45-2 (for FY 2017); ASC 606-10-32-25 and 606-10-32-26 
5

(for Q1-Q3 2018).4 To satisfy the first criterion for expense treatment, the identifiable benefit 

received by the vendor must be sufficiently separable from the product sold to the customer (i.e., 

the marketing-related services provided by the customer can be obtained from a third-party not 

purchasing MusclePharm’s products). See ASC 605-50-45-2(a). For this reason, product placement 

fees are generally reductions to revenue. See ASC 605-50-45-4. To satisfy the second criterion, the 

vendor must be able to reasonably estimate the fair value of the benefit identified. See ASC 605-

50-45-2(b).

14. MusclePharm’s marketing-related customer credits typically fell into two 

categories: (1) credits for partnership advertising and (2) product placement fees. Regarding 

partnership advertising, relevant characteristics of MusclePharm’s arrangements included: (1) 

agreements whereby a MusclePharm customer provided marketing activities that were integrated 

into the customer’s website (e.g., to enhance visibility of MusclePharm’s products) or targeted to 

the users of the website (rather than traditional print or media advertising that could be obtained 

from parties other than the customer), and (2) agreements whereby the type and amount of 

advertising was not specified, and MusclePharm did not request or receive this type of information. 

MusclePharm calculated the price of the partnership advertising (i.e., amount of customer credits) 

based on a percentage of the purchases made by the customer. Regarding product placement fees, 

these primarily consisted of agreements with MusclePharm’s largest customer (“Customer 1”) for 

end-cap promotions (placement of products at the end of store aisles) and fence promotions 

(placement of products in a display at the front of the store).

15. Without conducting an analysis of the customer credits as contemplated by GAAP, 

MusclePharm improperly recorded these transactions as operating expenses instead of netting them 

against revenue. The misclassification of marketing-related customer credits resulted in an 

overstatement of net revenue (and corresponding overstatement of operating expenses) of 

approximately $6.2 million for FY 2017, $2.6 million for Q1 2018, $3.8 million for Q2 2018, and 

$2.9 million for Q3 2018. 

16. The Commission’s prior enforcement action against MusclePharm involved, among 

other issues, this identical accounting issue. The 2015 SEC Order contained a finding that 

MusclePharm improperly accounted for advertising and promotion-related costs as advertising 

expenses rather than reductions of revenue for fiscal years 2010 and 2011, thereby materially 

overstating revenue for those periods.

Browne’s FY 2017 Audit Failures

Failure to Exercise Due Professional Care When Supervising the Audit of MusclePharm

17. PCAOB Auditing Standard (“AS”) 1015 states that due professional care imposes a 

responsibility upon each member of the engagement team to exercise reasonable care and diligence 

in the performance of his or her work throughout the audit process. See AS 1015.01-.08. Due 

 

4 Although ASC 606 uses different terminology than ASC 605 (e.g., referring to “distinct good or 

service” instead of “identifiable benefit”), its consideration-payable-to-a-customer framework closely 

aligns with ASC 605.
6

professional care requires the auditor to exercise professional skepticism, which is an attitude that 

includes a questioning mind and a critical assessment of audit evidence. See AS 1015.07.

18. PCAOB Auditing Standard 1201 states that the audit engagement partner is 

responsible for proper supervision of the work of engagement team members and for compliance 

with PCAOB standards. See AS 1201.03. This includes, when reviewing the work of engagement 

team members, evaluating whether the work performed is adequately documented and supports the 

conclusions reached. See AS 1201.05(c).

19. Browne, as engagement partner, was responsible for the supervision of the FY 2017 

audit work performed by Audit Firm 1, which occurred primarily between December 2017 and 

April 2018. As set forth below, Browne did not act with due professional care when performing his 

duties to supervise the audit. In particular, Browne did not exercise professional skepticism when 

he failed to act on red flags concerning the two accounting errors discussed above in the working 

papers he reviewed. 

Improper Sales Cutoff

20. During the FY 2017 audit work, Browne reviewed three working papers that 

included language stating that delivery occurred, and MusclePharm recognized revenue, upon 

shipment of its products to domestic customers (i.e., revenue recognition based on FOB origin 

shipping terms). However, Browne also reviewed the principal accounting policies disclosed in 

MusclePharm’s FY 2017 Form 10-K, which stated that MusclePharm recognized revenue when 

title and risk of loss had transferred, which was “typically” upon shipment. As such, the Form 10-

K indicated that certain MusclePharm customers had shipping terms other than FOB origin (e.g., 

FOB destination). Consequently, Browne should have known that MusclePharm’s practice of 

recognizing revenue upon shipment may not have been appropriate under GAAP, as title and risk 

of loss for some of MusclePharm’s customers did not transfer upon shipment.

21. Browne also reviewed the working papers that tested sales cutoff. In these working 

papers, the audit team reporting to Browne failed to document whether they considered 

MusclePharm’s customers’ different shipping terms during the course of the substantive testing. 

Instead, the working papers reflect that the audit team assumed that risk of loss transferred and 

delivery occurred at the time of shipment for all customers. For example, the inventory cutoff 

testing working paper stated that the engagement team compared MusclePharm’s packing slip to 

the invoice date to determine if sales were booked in the proper period. Browne should have 

observed that the packing slip date was inappropriate to establish that delivery had occurred for 

customers with FOB destination terms because it did not reflect the date that delivery had occurred 

(i.e., the date of receipt and acceptance). 

22. In addition, one of the working papers Browne reviewed during the FY 2017 audit 

work was an internal MusclePharm memorandum documenting its anticipated adoption of the 

revenue recognition standard ASC 606, which would become effective in FY 2018 (the “ASC 606 

Memo”). The ASC 606 Memo raised additional red flags that MusclePharm was recognizing 

revenue contrary to certain of its customers’ shipping terms. While the ASC 606 Memo stated that 

“revenue would be recognized when the product is shipped,” it also provided detailed information 
7

about contracts with certain large domestic customers, including Customer 1, stating that risk of 

loss transferred and delivery only occurred when the product was received and accepted by those 

customers (i.e., FOB destination shipping terms). 

23. Although the sales cutoff test work was based on a MusclePharm accounting 

practice – to recognize revenue upon shipment – that was contradicted by other audit evidence and 

MusclePharm’s revenue recognition policy set forth in its Form 10-K, Browne failed to identify 

that the shipping terms MusclePharm used to recognize revenue had not been adequately tested by 

the audit team.

24. Browne failed to exercise professional skepticism in the face of these red flags. He 

failed to inquire or ask for further information to resolve the inconsistency between 

MusclePharm’s revenue recognition practice (which assumed FOB origin terms for all customers) 

and the actual customer shipping terms reflected in the audit evidence (some of which were FOB 

destination). 

25. MusclePharm subsequently restated, among other customers, the Customer 1 

transactions that were shipped prior to the end of FY 2017, but delivered after the end of FY 2017.

Misclassification of Marketing-Related Customer Credits

26. During the FY 2017 audit work, Browne reviewed the working paper that tested 

MusclePharm’s allowance for sales discounts. This working paper specifically addressed an 

accrual for partnership advertising costs, almost all connected with MusclePharm’s second largest 

customer (“Customer 2”),which MusclePharm recorded as operating expenses rather than 

reductions to revenue (contra revenue). The working paper referenced the partnership advertising 

contract with Customer 2, and concluded that the Customer 2 arrangement was appropriately 

recorded as an operating expense in accordance with ASC 605-50-45-2.

27. This conclusion was erroneous as it was contradicted by the underlying source 

document. The information detailed in the referenced Customer 2 contract, which Browne 

reviewed, did not support recording the related costs as operating expenses under ASC 605-50-45-

2. Among other things, the Customer 2 contract did not contain any information concerning the 

type and amount of advertising to be provided by Customer 2. Further, the price Customer 2 

charged MusclePharm for the partnership advertising was based on a percentage of Customer 2’s 

purchases from MusclePharm, thus indicating it was a sales discount. 

28. Notwithstanding the lack of audit evidence supporting expense treatment for these 

marketing-related customer credits, and the audit team’s ASC 605-50-45-2 conclusion regarding 

the Customer 2 contract, Browne failed to inquire or ask for further information from the audit 

team or MusclePharm’s management to resolve whether MusclePharm’s accounting for the 

customer credits was proper under GAAP. 

29. In addition, Browne reviewed a working paper that evaluated general ledger 

account balance variances between FY 2016 and FY 2017. For significant variances, the audit 

team obtained explanations from MusclePharm’s management. As part of these analytical 
8

procedures, the audit team identified a significant variance for MusclePharm’s “Other Advertising” 

account, which included marketing-related customer credits. The documented explanation 

provided for this variance explained that it was due to “promotions with some of the Company’s 

key customers,” and specifically referenced Customer 1 and Customer 2. The balance and variance 

associated with the “Other Advertising” account exceeded the audit planning materiality threshold. 

30. Browne, however, failed to make any additional inquiries or request additional 

information to understand the substance of these customer credits, or why MusclePharm had 

classified them as operating expenses rather than contra revenue.

31. Further, MusclePharm’s FY 2017 Form 10-K states in the notes to the financial 

statements: “We record advertising related credits with customers as a reduction to revenue as no 

identifiable benefit is received in exchange for credits claimed by the customer.” (Emphasis 

added). However, the ASC 606 Memo states the opposite: 

“The company also noted that significant credits are processed with customers 

during the year, however, these credits are related to one-off marketing and 

advertising costs and are recognized as such within the general operating 

expenses for the company. The most significant costs that the Company 

experiences with their customers are for partnership advertising, store support and 

international marketing.” (Emphasis added).

32. Despite the contradiction between the working papers Browne reviewed reflecting 

that MusclePharm was recording marketing-related customer credits as operating expenses (and 

not contra revenue) and the Form 10-K disclosure reflecting that such credits were recorded as 

reductions to revenue, Browne failed to inquire or request further information from the audit team 

or MusclePharm’s management to resolve the inconsistency. Instead, Browne failed to exercise 

professional skepticism when he failed to recognize the evidence in the working papers, and 

instead relied solely on MusclePharm’s 2017 Form 10-K to conclude, erroneously, that 

MusclePharm was recording marketing-related customer credits in accordance with GAAP.

33. MusclePharm subsequently restated, among other customers, the Customer 2 

marketing-related customer credits that were improperly recorded as operating expenses.

Failure to Understand Key Aspects of MusclePharm’s Business

34. PCAOB Auditing Standard 2110 states that an auditor should obtain an 

understanding of the company and its environment to understand the events, conditions, and 

company activities that might reasonably be expected to have a significant effect on the risks of 

material misstatement. See AS 2110.07. This includes, for example, understanding the audit 

client’s key customer relationships, business processes, and application of accounting principles. 

See AS 2110.10, .12, and .28. In addition, the auditor should presume that there is a fraud risk 

involving improper revenue recognition and evaluate which types of revenue, revenue transactions, 

or assertions may give rise to such risks. See AS 2110.68.
9

35. Browne failed to gain an understanding of how MusclePharm actually recognized 

revenue or how it recorded marketing-related customer credits. Moreover, although he was aware 

of MusclePharm’s previous settlement with the SEC, Browne did not obtain or review a copy of 

the 2015 SEC Order. Had he done so, Browne would have known the SEC charged MusclePharm 

with numerous violations, including incorrectly accounting for marketing-related customer credits 

during 2011 and 2012, which is the same practice MusclePharm engaged in during 2017 and 2018. 

Browne thus failed to consider this aspect of the 2015 SEC Order when developing an 

understanding of MusclePharm’s business and accounting practices, and assessing audit risk. 

Failure to Plan the Audit Based on an Assessment of Risk When Conducting the Audit

36. PCAOB Auditing Standard 2101 states that the engagement partner is responsible 

for planning the work of an audit. See AS 2101.03. When developing the audit plan, the auditor 

should evaluate, among other things, legal or regulatory matters of which the company is aware, 

and public information about the company relevant to the evaluation of the likelihood of material 

financial statement misstatements. See AS 2101.07. The auditor should modify the overall audit 

strategy and audit plan, as necessary, if circumstances change significantly during the audit, such 

as obtaining audit evidence that contradicts the audit evidence upon which the risk assessment was 

based. See AS 2101.15; AS 2110.74.

37. PCAOB Auditing Standard 2301 states the auditor should design and perform audit 

procedures in a manner that addresses the assessed risks of material misstatement for each relevant 

assertion of each significant account and disclosure. See AS 2301.08. In addition, the auditor 

should perform substantive procedures, including tests of details, that are specifically responsive to 

the assessed significant risks, including fraud risks. See AS 2301.11.

38. As part of the audit planning, Browne reviewed the working paper in which the 

audit team assessed revenue recognition (existence of sales) and the valuation of sales as 

“significant risks” for the MusclePharm FY 2017 audit. Both sales cutoff and the classification of 

marketing-related customer credits affected revenue recognition and the calculation of net revenue. 

Despite being significant risks, Browne failed to plan the audit to sufficiently test these areas. 

Further, he did not adjust the audit plan when the audit team received evidence that MusclePharm 

was recording revenue and classifying marketing-related customer credits in a manner that was 

inconsistent with its Form 10-K disclosures and GAAP.

Failure to Obtain Sufficient Appropriate Audit Evidence When Conducting the Audit

39. PCAOB Auditing Standard 1105 states the auditor must perform audit procedures 

to obtain sufficient appropriate audit evidence to provide a reasonable basis for his or her opinion. 

See AS 1105.04. If audit evidence obtained from one source is inconsistent with that obtained from 

another, the auditor should perform the audit procedures necessary to resolve the matter and should 

determine the effect, if any, on other aspects of the audit. See AS 1105.29.
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40. PCAOB Auditing Standard 2805 states that if a representation made by 

management is contradicted by other audit evidence, the auditor should investigate the 

circumstances and consider the reliability of the representation made. See AS 2805.04.

41. The working papers Browne reviewed reflected that MusclePharm was engaging in 

improper revenue recognition and misclassifying marketing-related customer credits. In addition, 

the audit evidence, such as the ASC 606 Memo, showed inconsistencies between MusclePharm’s 

actual accounting practices and its Form 10-K disclosures. Browne, however, did not require the 

audit team to gather the additional audit evidence needed to resolve these matters.

Failure to Properly Evaluate Audit Results When Conducting the Audit

42. PCAOB Auditing Standard 2810 states that, in forming an opinion on the financial 

statements, the auditor should take into account all relevant audit evidence, regardless of whether it 

appears to corroborate or to contradict the assertions in the financial statements. See AS 2810.03.

43. Browne did not take into account relevant information in the working papers he 

reviewed indicating that MusclePharm’s financial statements were not, in material respects, 

prepared in conformity with GAAP. 

Failure to Ensure Appropriate Documentation 

of the Audit Work When Conducting the Audit

44. PCAOB Auditing Standard 1215 states that audit documentation should be 

prepared in sufficient detail to provide a clear understanding of its purpose, source, and 

conclusions reached. See AS 1215.04. The audit documentation should, among other things, 

support the basis for the auditor’s conclusions concerning every relevant financial statement 

assertion. See AS 1215.05(b).

45. Browne failed to ensure that the Audit Firm 1 audit team adequately documented 

evidence supporting the audit team’s conclusions. Instead, the working papers prepared by the 

audit team, and reviewed by Browne, do not provide support for the conclusions reached. For 

example, the working papers do not support that the Customer 1 arrangement met the revenue 

recognition criteria upon product shipment or that the Customer 2 arrangement met both criteria of 

ASC 605-50-45-2 for recording the credits as operating expenses.

Browne’s Q1-Q3 2018 Quarterly Review Failures

Failure to Adhere to PCAOB Standards for Review of Interim Financial Information When 

Conducting Reviews of MusclePharm’s Quarterly Filings 

46. PCAOB Auditing Standard 4105 states that if, in performing a review of interim 

financial information, an accountant becomes aware of information that leads him or her to believe 

that the interim financial information may not be in conformity with generally accepted accounting 

principles in all material respects, the accountant should make additional inquiries or perform other 
11

procedures that the accountant considers appropriate to provide a basis for communicating whether 

he or she is aware of any material modifications that should be made to the interim financial 

information. See AS 4105.22. The accountant should also prepare documentation in connection 

with a review of interim financial information that includes any significant findings or issues, such 

as when results of review procedures indicate that the interim financial information could be 

materially misstated, including actions taken to address such findings, and the basis for the final 

conclusions reached. See AS 4105.52.

Improper Sales Cutoff

47. During the Q1-Q3 2018 interim reviews, Browne reviewed information indicating 

that MusclePharm was recognizing revenue based on the shipment of its products even though it 

had FOB destination shipping terms with several large customers. In particular, for each of the first 

three quarters of 2018, Browne reviewed a version of the ASC 606 Memo containing the same red 

flags presented during the FY 2017 audit. Browne, however, did not inquire or request additional 

information to resolve these contradictions, or request testing to determine the materiality of the 

sales cutoff issue.

Misclassification of Marketing-Related Customer Credits

48. During the Q1-Q3 2018 interim reviews, Browne reviewed the profit and loss 

(“P&L”) analytical procedures working papers that indicated that MusclePharm continued to 

record marketing-related customer credits as operating expenses (which was inconsistent with its 

prior-year disclosures). These working papers also showed that the expenses associated with 

customer payments were increasing over time, and exceeded the applicable quarterly review 

materiality thresholds. 

49. For example, during the Q1 2018 quarterly review, Browne reviewed the Audit 

Firm 1 engagement team’s P&L analytical procedures working paper showing that a portion of the 

increased advertising and promotion expense (an amount substantially over the Q1 2018 

materiality threshold) was attributable to “the Company paying [Customer 1] to move product to a 

better location.” This was an additional red flag that MusclePharm was improperly recording a 

material amount of product placement fees as operating expenses. Browne, however, failed to 

require additional quarterly review procedures to resolve whether MusclePharm was recording the 

marketing-related customer credits in accordance with GAAP.

50. In addition, during the Q1 2018 quarterly review, Browne was provided with the 

Audit Firm 1 engagement team comments to the Form 10-Q questioning MusclePharm’s 

classification of marketing-related customer credits as operating expenses instead of as contra 

revenue. Browne, however, failed to ensure that the engagement team documented the response 

from MusclePharm, if any, to the inquiry concerning the marketing-related customer credits even 

though the issue was material to the financial statements for the quarter.
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E. VIOLATIONS

51. Section 4C of the Exchange Act and Rule 102(e)(1)(ii) of the Commission’s Rules 

of Practice provide, in part, that the Commission may censure or deny, temporarily or permanently, 

the privilege of appearing or practicing before the Commission to any person who is found by the 

Commission to have engaged in improper professional conduct. Exchange Act Section 4C(b) and 

Rule 102(e)(1)(iv) of the Commission’s Rules of Practice define improper professional conduct 

with respect to persons associated with public accounting firms and persons licensed to practice as 

accountants to include repeated instances of unreasonable conduct that indicate a lack of 

competence. As a result of the conduct described above, Browne 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. Browne’s conduct involved repeated instances of unreasonable 

conduct, each resulting in violation of PCAOB standards.

52. During the period at issue herein, Rule 2-02(b)(1) of Regulation S-X required an 

accountant’s report to state “whether the audit was made in accordance with generally accepted 

auditing standards” (“GAAS”). “[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.” SEC Release No. 34-49708 (May 14, 2004). As a result of the conduct described 

above, Browne caused Audit Firm 1 to violate Regulation S-X Rule 2-02(b)(1) when he, as the 

engagement partner on the FY 2017 audit, approved the issuance of Audit Firm 1’s audit report, 

which stated that Audit Firm 1 had conducted the audit in accordance with PCAOB standards 

when, in fact, it had not.

F. FINDINGS

53. Based on the foregoing, the Commission finds that Browne 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. 

54. Based on the foregoing, the Commission finds that Browne caused a violation of 

Rule 2-02(b) of Regulation S-X by Audit Firm 1.

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent Browne’s Offer.

Accordingly, it is hereby ORDERED, effective immediately, that:

A. Browne shall cease and desist from committing or causing any violations and any

future violations of Rule 2-02(b) of Regulation S-X. 
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B. Browne is denied the privilege of appearing or practicing before the Commission as 

an accountant. 

C. After eighteen (18) months from the date of the Order, Respondent may request that 

the Commission consider Respondent’s reinstatement by submitting an application to the attention 

of the Office of the Chief Accountant.

D. In support of any application for reinstatement to appear and practice before the 

Commission as a preparer or reviewer, or a person responsible for the preparation or review, of 

financial statements of a public company to be filed with the Commission, other than as a member 

of an audit committee, as that term is defined in Section 3(a)(58) of the Exchange Act, Respondent 

shall submit a written statement attesting to an undertaking to have Respondent’s work reviewed 

by the independent audit committee of any public company for which Respondent works or in 

some other manner acceptable to the Commission, as long as Respondent practices before the 

Commission in this capacity and will comply with any Commission or other requirements related 

to the appearance and practice before the Commission as an accountant.

E. In support of any application for reinstatement to appear and practice before the 

Commission as a member of an audit committee, as that term is defined in Section 3(a)(58) of the 

Exchange Act, as a preparer or reviewer, or as a person responsible for the preparation or review, 

of any public company’s financial statements that are filed with the Commission, Respondent shall 

submit a statement prepared by the audit committee(s) with which Respondent will be associated, 

including the following information:

1. A summary of the responsibilities and duties of the specific audit 

committee(s) with which Respondent will be associated;

2. A description of Respondent’s role on the specific audit committee(s) with 

which Respondent will be associated;

3. A description of any policies, procedures, or controls designed to mitigate 

any potential risk to the Commission by such service; 

4. A description relating to the necessity of Respondent’s service on the 

specific audit committee; and

5. A statement noting whether Respondent will be able to act unilaterally on 

behalf of the Audit Committee as a whole. 

F. In support of any application for reinstatement to appear and practice before the 

Commission as an independent accountant (auditor) before the Commission, Respondent must be 

associated with a public accounting firm registered with the PCAOB and Respondent shall submit 

the following additional information:
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1. A statement from the public accounting firm (the “Firm”) with which 

Respondent is associated, stating that the firm is registered with the PCAOB 

in accordance with the Sarbanes-Oxley Act of 2002;

2. A statement from the Firm with which the Respondent is associated that the 

Firm has been inspected by the PCAOB and that the PCAOB did not 

identify any criticisms of or potential defects in the Firm’s quality control 

system that would indicate that Respondent will not receive appropriate 

supervision; and

3. A statement from Respondent indicating that the PCAOB has taken no 

disciplinary actions against Respondent since seven (7) years prior to the 

date of the Order other than for the conduct that was the basis for the Order.

G. In support of any application for reinstatement, Respondent shall provide 

documentation showing that Respondent is currently licensed as a CPA and that Respondent has 

resolved all other disciplinary issues with any applicable state boards of accountancy. If 

Respondent is not currently licensed as a CPA, Respondent shall provide documentation showing 

that Respondent’s licensure is dependent upon reinstatement by the Commission. 

H. In support of any application for reinstatement, Respondent shall also submit a 

signed affidavit truthfully stating, under penalty of perjury: 

1. That Respondent has complied with the Commission suspension Order, and 

with any related orders and undertakings, or any related Commission 

proceedings, including any orders requiring payment of disgorgement or 

penalties;

2. That Respondent undertakes to notify the Commission immediately in 

writing if any information submitted in support of the application for 

reinstatement becomes materially false or misleading or otherwise changes 

in any material way while the application is pending;

3. That Respondent, since the entry of the Order, has not been convicted of a 

felony or a misdemeanor involving moral turpitude that would constitute a 

basis for a forthwith suspension from appearing or practicing before the 

Commission pursuant to Rule 102(e)(2); 

4. That Respondent, since the entry of the Order:

(a) has not been charged with a felony or a misdemeanor involving 

moral turpitude as set forth in Rule 102(e)(2) of the Commission’s 

Rules of Practice, except for any charge concerning the conduct that 

was the basis for the Order;
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(b) has not been found by the Commission or a court of the United 

States to have committed a violation of the federal securities laws, 

and has not been enjoined from violating the federal securities laws, 

except for any finding or injunction concerning the conduct that was 

the basis for the Order; 

(c) has not been charged by the Commission or the United States with a 

violation of the federal securities laws, except for any charge 

concerning the conduct that was the basis for the Order;

(d) has not been found by a court of the United States (or any agency of 

the United States) or any state, territory, district, commonwealth, or 

possession, or any bar thereof to have committed an offense (civil or 

criminal) involving moral turpitude, except for any finding 

concerning the conduct that was the basis for the Order; and

(e) has not been charged by the United States (or any agency of the 

United States) or any state, territory, district, commonwealth, or 

possession, civilly or criminally, with having committed an act of 

moral turpitude, except for any charge concerning the conduct that 

was the basis for the Order.

5. That Respondent’s conduct is not at issue in any pending investigation of

the Commission’s Division of Enforcement, the PCAOB’s Division of 

Enforcement and Investigations, any criminal law enforcement 

investigation, or any pending proceeding of a State Board of Accountancy, 

except to the extent that such conduct concerns that which was the basis for 

the Order.

6. That Respondent has complied with any and all orders, undertakings, or 

other remedial, disciplinary, or punitive sanctions resulting from any action 

taken by any State Board of Accountancy, or other regulatory body.

I. Respondent shall also provide a detailed description of:

1. Respondent’s professional history since the imposition of the Order, 

including:

(a) all job titles, responsibilities and role at any employer;

(b) the identification and description of any work performed for entities 

regulated by the Commission, and the persons to whom Respondent 

reported for such work; and
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2. Respondent’s plans for any future appearance or practice before the 

Commission.

J. The Commission may conduct its own investigation to determine if the foregoing 

attestations are accurate.

K. If Respondent provides the documentation and attestations required in this Order

and the Commission (1) discovers no contrary information therein, and (2) determines that 

Respondent truthfully and accurately attested to each of the items required in Respondent’s

affidavit, and the Commission discovers no information, including under Paragraph J, indicating 

that Respondent has violated a federal securities law, rule or regulation or rule of professional 

conduct applicable to Respondent since entry of the Order (other than by conduct underlying 

Respondent’s original Rule 102(e) suspension), then, unless the Commission determines that 

reinstatement would not be in the public interest, the Commission shall reinstate the respondent for 

cause shown.

L. If Respondent is not able to provide the documentation and truthful and accurate 

attestations required in this Order or if the Commission has discovered contrary information, 

including under Paragraph J, the burden shall be on the Respondent to provide an explanation as to 

the facts and circumstances pertaining to the matter setting forth why Respondent believes cause 

for reinstatement nonetheless exists and reinstatement would not be contrary to the public interest. 

The Commission may then, in its discretion, reinstate the Respondent for cause shown. 

M. If the Commission declines to reinstate Respondent pursuant to Paragraphs K and 

L, it may, at Respondent’s request, hold a hearing to determine whether cause has been shown to 

permit Respondent to resume appearing and practicing before the Commission as an accountant.

N. Browne shall, within 14 days of the entry of this Order, pay a civil money penalty 

in the amount of $11,162 to the Securities and Exchange Commission for transfer to the general 

fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely payment 

is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717. 

Payment must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 
17

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying John 

R. Browne 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 sent to Ian S. Karpel, Assistant Regional 

Director, Division of Enforcement, Securities and Exchange Commission, 1961 Stout Street, Suite 

1700, Denver, CO 80294-1961. 

O. 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.

V.

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).

By the Commission.

Vanessa A. Countryman

Secretary