Editor’s note: This article was originally published on Aug. 15, 2019. Update is at the […]
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By “all kinds of screwed up” we mean “screwed 17 ways to Sunday”. After firing Deloitte last week, two top DY executives (CEO Christopher Holbert and CFO William Suh) have bailed, DYP shares are in the tank (down 47% as of publication) and, oh, they’re going to need to find a new audit committee chairman as their last one, James Zhang, ran for the hills.
Before running, however, he sent this really nice note explaining his motivations:
To: The Board of Duo Yuan Printing(DY).
6th Sept, 2010.
Dear Mr. Chairman and the follow directors of the Board:
Subject: My resignation as Company Audit Committee (AC) Chairman and Independent Director with immediate effect.
It has been almost one year since DY listed in the NYSE. I have to say that working closely with the Chairman, CEO and CFO of the company has been a great pleasure for me.
From Roughly one month ago, I got the phone call from Frank Li, the Audit Partner of Deloitte (DT) to express concerns to the Audit Committee over several financial irregularities and management control weakness. After hearing the full story, I immediately called an AC meeting and upon receiving unanimous approval from the AC as a well as support from the Chairman, the AC immediately engaged Latham Watkins, the US Law Firm, to handle the independent investigation not only to report back to the AC, but also as a part of the audit process requested by DT to give an opinion to the 2010 DY company financials. As our Chairman put it in the board Meeting just now that maybe due to the cross culture differences between US style work and maybe because of the second tier management don’t fully understand the US listing requirements, the investigation has not progressed in the last month. This delay could potentially render the company not filing its annual financial statements on time to the SEC.
In the past week, the Management has suggested to change the auditors of the company from DT to Frazer Frost (FF) who was the company prior auditors. This proposal has just been resolved in the full board meeting and Full AC meeting with voting taking place of 4 against 3 in favor and 2 against 1 in favor.
As the AC chairman and independent Director of the company, I respect the company democratic decision process as stipulated by the company Memorandum and Articles of Association. However, as a qualified UK Chartered Accountant and a trained Professional, I have brought to the attention of the board the following potential risks related to the change of auditors. These risks can be summarized as follows:
1. FF has not yet signed engagement letter with the company which is a risk to the company.
2. Change of auditors during the investigation process could potentially lead to further investigation from the SEC.
3. To change from a Big4 audit firm to a non-Big4 could have very negative impact in the investment community in terms of corporate governance thus lead to potential share price drop and subsequent US class law suit.
4. Even the Company US counsel has indicated in the meeting against change of auditors at this particular time frame.
Keep it classy, JZ, and good luck wherever you end up after this disaster of a company.
In a bizarre piece of auditing news released late on a Sunday night, KPMG has verbally resigned as Nebraska-based TierOne Bank’s independent auditor, withdrawn its audit opinion for 2008 and taken back its review of TierOne’s financials for the quarter ended March 31, 2009.
Well damn, we’re fairly sure it couldn’t get any worse than that for TierOne, could it?
Citing risk of material misstatement, KPMG has also warned the audit committee that TierOne’s financials are not to be relied upon by investors. Even Overstock.com doesn’t get that kind of treatment.
Last month the Office of Thrift Supervision – TierOne’s primary regulator – gave it until April 30th to merge with or sell its assets to a healthier financial institution so we’re going to go out on a limb here by assuming that they aren’t going to have good news come Friday and KPMG is just doing the responsible thing by backing away from the mess with a week left.
So this makes two SEC clients lost for KPMG in as many days. Again, Jefferies had no disagreements with KPMG yada yada yada. Jefferies didn’t even receive a GCO like Sleep Number. However, KPMG did include this language for this year’s (i.e. December 31, 2009) audit opinion:
“As discussed in Note 1 to the consolidated financial statements, in 2009 the Company retrospectively changed its method of accounting for noncontrolling interests in subsidiaries and earnings per share due to the adoption of new accounting requirements issued by the FASB.”
BFD, right? Could Jefferies really be so bent of shape over that to make the auditor switcheroo?
The other point is — and maybe we’re making a mountain out of a molehill here — this is the second example of a non-standard auditor opinion from the House of Klynveld followed by clients kicking them to the curb for the clean scalped, mustachioed comfort of Deloitte.
One thing is for sure and that is that Deloitte is clearly on the offensive here after losing so many SEC clients last year. Still, we’re curious about a few things: 1) Is Big D going after KPMG clients specifically? 2) Is there a secret weapon being employed to woo these clients (e.g. Barry does a dead-ringer Dr. Phil impression during the presentation)? 3) Are KPMG clients upset about Tim Flynn stepping down as chairman? OR are they upset that the Radio Station is still camping out in Iran?
If you’ve got concrete knowledge, crackpot theories or just want to take a shot in the dark (since most of you are probably drinking by now) on this new and emerging (?) trend, fire away.
Jefferies Announces the Engagement of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm [Business Wire]
Maybe! But the movie theater company did dump PwC on October 1st according to a filing with the SEC after just two years.
According to the filing, P. Dubs had only been engaged as AMC’s auditors for the last two fiscal years (4/3/08 and 4/2/09) and the audit committee decided that KPMG will now get the pleasure of opining, also effective on October 1st (congrats, we guess?).
As is typical in these auditor swaps, AMC’s filing states that they had no disgreements with PwC “on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.”
We’d like to think this came down to a PwC partner making some sort of stand against the asinine concession prices that are borderline unethical but that’s just our personal vision. If you’ve got your own ideas about the reasons for the dismissal, discuss them in the comments.
AMC Entertainment hires KPMG to replace PricewaterhouseCoopers [Kansas City Business Journal]