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  • wobatus wobatus Aug 26, 2009 2:06 PM Flag

    Change of Auditors

    Switching from one large accounting firm to another cannot be a "good" thing. It can be neutral or it can be bad.

    Read again the wording of that announcment:

    <<The Company and KPMG have not had any disagreement on matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures for which disagreement, if not resolved to the satisfaction of KPMG, would have caused KPMG to make reference to the subject matter of the disagreement in connection with its report on the Company's consolidated financial statements.>>

    They had a disagreement. management ws forced to change some accounting treatment otherwise KPMG would have felt compelled to state the disagreement. KPMG was fired. That's my take.

    There have been many bad signs over the last year or so about these guys.

    And no, I am not a basher, but a very regretful long. Not worth selling to me at this level, really. Perhaps the unaudited results will cause seem cheer, but given that they have already said revenues will be short, I am not overly confident. Perhaps when this giant mess clears up and looking forward. But this is now a different business than the one I thought i was investing in.

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    • If you read that statement they say there was NO disagreement.

      If you continue reading you will also find:

      "we believe that PwC will provide our shareholders with the best combination of cost and quality going forward"

      For all we know they could save $10,000 a year and that was the sole reason they switched. Truthfully who knows, it is all speculation. The fact remains they are now using the biggest and best auditor in the USA.

      • 3 Replies to buylowsellhigh2009
      • One thing that hasn't been discussed in this thread is the possibility that the anonymous letter came from somebody on the KPMG audit team. I have seen it before where somebody on an audit team becomes so convinced that the accounting for a transaction is incorrect that he/she sends a letter to the SEC/audit committee/PCAOB/etc... In the situations I have seen, the person writing the letter has already discussed the issue within the audit team but was unsatisfied with the response they got from others on the engagement team. So, they try and go over everybody's head on the audit team--many whom have 20+ years audit experience. I'm not saying anybody who does this is right or wrong. However, if this theory is correct, it would be very plausable that management and/or KPMG discovered who wrote the letter and, consequently, management fired KPMG for allowing somebody on the audit team to create such a public disaster. (Note: If you are going to wite such an anonymous letter, you better be damn sure you are right because if you are wrong and somebody discovers you wrote the letter, you are screwed.)

        HOWEVER, the good news is that--assuming my theory is correct--the Board has not announced that PWC or KPMG are requiring past financials to be restated. So, the lack of restatement news seems to indicate both KPMG and PWC agree the allegations were false or at least not material to the financial statements. (Generally, related party transactions are considered material regardless of the $ amount.)

        So, just my 2 cents.

        Interesting company. I may be jumping in long before the ER.

      • BTW, do you seriously put much credence in that throwaway line about Pwc providing the "best cost an quality" going forward as the eraon for the switch. You could say the same about say switching from Xerox to Ricoh.

      • I read it carefully. It was worded carefully.

        There was NO disagreement which was not resolved to KPMG's satisfaction.

        In other words, there WAS a disagreement, it was resolved to KPMG's satisfaction, and they then parted ways.

        Read between the lines. In the middle of delayed statements and internal investigation they thought "gee, let's save 10k a year and move to PwC?

        That isn't what happened.

        Yes, I am speculating. Kinda like speculating that OJ Simpson was probably guilty.


        All kidding aside, this is like chicken soup in reverse: it can't be good.

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