Please ensure Javascript is enabled for purposes of website accessibility
September 24, 2023

Company Loses Bad Auditor; Disaster Ensues

When a company changes their auditors, it can be a bit of a headache. As inconvenient as it can be, I've never heard a company express despair over it until I read this 8-K from Nano Labs Corp.

Their auditor was none other than Terry Johnson, the Florida CPA who didn't audit much for his clients and who was ceremoniously barred from practicing before the SEC.

Auditor Carousel spotted this in its weekly roundup up of changes and while Nano Labs dismissed Johnson back in May, the company:

The Company's Board of Directors has subsequently determined that the suspension of Johnson and the necessity of re-auditing the financial statements for fiscal year ended June 30, 2014 has caused disastrous economic and financial consequences for the Company. It has also presented insurmountable issues in obtaining working papers and financial data from Johnson pertaining to its prior financial statements for fiscal year ended June 30, 2014 as prepared by Johnson , which are being requested by the Company's current auditors [Malone Bailey]. Therefore, the Board of Directors has determined that it is in the best interests of the Company and its shareholders to de-register its securities and cease becoming a fully reporting company under the Securities Exchange Act of 1934, as amended.

The Board of Directors has determined that it will proceed with the requirements for listing as a pink sheet company with the OTC Markets.

First of all — and maybe I'm wrong — but if losing your auditor "caused disastrous economic and financial consquences" for your company, maybe you don't have a very good business! I mean, things happen and auditors come and ago; Auditor Carousel posts dozens of auditor changes every week and you don't hear about business pulling their securities as a result, including many of Terry Johson's clients!

Second, I don't understand why Johnson's workpapers are such an issue. He didn't have many workpapers to begin with! The only things Malone Bailey might learn from them is A) how to be grossly negligent when performing an audit and B) that they shouldn't have taken Nano Labs on as a client.

I guess the bright side is that auditors are valuable enough to some companies that their loss can have great consequences. The catch is, they may not be companies anyone should be investing in anyway.

[8-K via Auditor Carousel

Latest Accounting Jobs--Apply Now:

Have something to add to this story? Give us a shout by email, Twitter, or text/call the tipline at 202-505-8885. As always, all tips are anonymous.

Comments are closed.

Related articles

PwC Canada Totally Blew Their Perfect Score on PCAOB Inspections This Time Around

A few days ago the paper-pushers at the PCAOB released 15 new inspection reports and three expanded reports for the following firms: Inspection reports De Visser Gray LLP (Canada) Ernst & Young Limited Corp. (Panama) Frost, PLLC Harbourside CPA LLP (Canada) Keith K Zhen CPA Maggart & Associates, P.C Miller Wachman LLP PBMares, LLP PKF […]

Old guy in a suit counting his money

PwC Is Suddenly Scared of Making Money

First reported by¬†Financial Times on Sunday, it seems PwC is now overly cognizant of conflicts of interest, even just the perceived ones. PwC is planning to give up tens of millions of dollars of consulting work for its US audit clients to reduce the risk of conflicts of interest, challenging its rival Big Four firms […]