Mike: I am not sure on all the Reg S stuff at this point. I need to learn more about it myself first. However, I find the AA stuff very interesting. They had a premier firm do their audit and then basically resign. I did not know this. Again, I didn't do much DD on this stock. Anyway, I don't think they changed auditors due to a conflict of interest on their financial statements. Basically, the opinion they released had something to do with a going concern.
In brief, this means the financial statements are clean but the auditors feel there was some merit that things might get tight in the future and the company may have problems staying in business. This is not news and was disclosed in the prior reports based on the info you referred to me.
Now - why AA might not want to continue. In brief GOING CONCERNS are very risky. AA is one of the more aggressive big six firms and they charge more and take on risk. However, like all Big Six Accounting firms, they try to make money. No offense to HDSt, but it is a small client and probably generates little revenue for AA. Also, it's not like their name on that audit report generates a ton of publicity. At the big six firm I worked for (and still do occassionally) we are "weeding" out smaller clients and focusing more on larger clients that bring in more revenues and that we can sell consulting projects to. Also, our name on big clients generates good publicity for the firm. In fact, some of our smaller offices, we literally closed them down and kept only the "cream of the crop."
AA signed a report saying the f/s were o.k. However, them moving on may have something to do with the size of the company and the risks involved. I think we are all aware of the risks with this company. Arthur Anderson probably figured why take the risk for such a small amount of money. If things get bad, we don't want to get sued. Also, it could be that for the amount they had to charge to do the audit, they were not making enough money (rate per hour). I know all accounting firms get rid of clients if they are not making enough money on them. Yes, Big six are in business to provide audits, but they are also in business to make money. Due to some of the issues with HDST and the fact that it is a relatively small company, I doubt AA was getting rich off the audit.
Does anyone know who the new auditor is??
Mike - I hope this helped. This is just based on my opinion and my experience with a Big Six firm the last 5 years. |
