Shorts are playing on "where there is smoke, there is a fire". It's not illogical to think that there may be bigger devils than this minor accounting error found. In fact, CEO/CFO typically don't get fired for minor accounting error, so we are just hearing the tip of the iceberg possibly.
Stock investment is all about the numbers. If you can't trust the numbers, how can you put a valuation on the stock?
I agree, that is why I am hesitant to buy this one, but we can still make educated guesses. Also the fact that there is hardly any tangible equity in the stock ( goodwill and intangible is double the equity) may give any acquirer pause. Also the low amount of cash on hand will give any PE firms pause.