It’s worth mentioning since the SEC had to make an example out of someone:
The SEC alleges that American Growth Funding II LLC and Ralph Johnson promised investors 12-percent annual returns and falsely claimed its financial statements were being audited each year. AGF II, which raises capital from investors to provide loans to businesses, also made misrepresentations in offering documents about its management and concealed details about deteriorating loan values that could imperil full payment of the promised returns to investors. The company’s placement agent Portfolio Advisors Alliance and its owner Howard Allen and president Kerri Wasserman allegedly knew the offering documents were inaccurate yet continued using them to solicit sales of AGF II securities.
To Ralph Johson’s credit, it’s not like he didn’t try to retain an audit firm. Here are some of the highlights from the SEC’s complaint.
Attempt #1
Attempt #2
Attempt #3
That last paragraph is my favorite. It’s like the SEC staff member who wrote the complaint couldn’t believe someone would keep lying about having audited financial statements. It’s not like there’s a shortage of audit firms who would take on a sketchy client.
The CAQ’s continuing dialogue with individual investors indicates that many in the marketplace do not fully understand the scope of the audit process and the responsibilities placed on public company auditors. The In-Depth Guide to Public Company Auditing will help to bridge that information gap. The new Guide describes how a public company audit firm decides to accept a new audit engagement, how it assesses the risk that the financial statements contain material misstatements as part of determining the audit’s scope, and then how the auditors perform and report their findings – all in plain English. [
