January 24, 2022

Yes, the SEC *Has* Heard About the Trend of Accounting Problems at Reverse Merger Companies

The Securities and Exchange Commission warned investors about the risk of fraud, accounting problems and other abuses at companies that obtain stock listings through so-called reverse mergers.

The warning on Thursday comes amid a rash of accounting scandals involving China-based companies listed on U.S. exchanges through reverse mergers, or mergers with U.S. shell companies. “Many companies either fail or struggle to remain viable following a reverse merger,” the SEC said in an investor bulletin. Investors should be especially wary of reverse merger operating companies that are “nonreporting,” meaning they are not required to file reports with the SEC, the agency said. “Keep in mind that information from online blogs, social networking sites and even a company’s own website may be inaccurate and sometimes intentionally misleading,” the SEC said. [Reuters]

The Securities and Exchange Commission warned investors about the risk of fraud, accounting problems and other abuses at companies that obtain stock listings through so-called reverse mergers.

The warning on Thursday comes amid a rash of accounting scandals involving China-based companies listed on U.S. exchanges through reverse mergers, or mergers with U.S. shell companies. “Many companies either fail or struggle to remain viable following a reverse merger,” the SEC said in an investor bulletin. Investors should be especially wary of reverse merger operating companies that are “nonreporting,” meaning they are not required to file reports with the SEC, the agency said. “Keep in mind that information from online blogs, social networking sites and even a company’s own website may be inaccurate and sometimes intentionally misleading,” the SEC said. [Reuters]

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.

Related articles

Friday Footnotes: Canned Deloitte Manager Goes Off; Disrespectful Clients; Audit Smackdown | 1.21.22

Fired manager accuses Deloitte of defrauding VW and a #MeToo cover-up [Financial Times] A manager fired by Deloitte’s German business after raising concerns about alleged misconduct has accused it of defrauding Volkswagen and ignoring sexual harassment allegations against senior staff. The whistleblower made the allegations last week at a labour court in Stuttgart where he […]

a dog wearing a bear costume

Friday Footnotes: KPMG Partner Blames Juniors; Desperate Firms Look to India For Talent; EY’s Old Digs | 1.14.22

Carillion tribunal: Former KPMG staff turn on each other [The Guardian] The former KPMG partner in charge of auditing Carillion’s accounts before its collapse has blamed his more junior colleagues for misleading regulators, as former team members turned on each other during a tribunal hearing allegations against the firm and six individual auditors. Looking abroad: […]