Well it's easy to say all these things, yet there is a big problem with those neg. accusations, BDO Seidman. BDO Seidman is one of the oldest most respected accounting and consulting firms in the country, and they did not get that way by representing bogus, or fraudulent companys.
Let's refresh your memory. So many people seem to have problems with this. Before he took over EDII, Daniel Dror was Chairman and CEO of MicroTel (MCTL). MCTL's auditors were Deloitte and Touche, an eminently respectable firm. They resigned over a dispute about--it would seem--the business practices of the Microtel board. And so Dror hired BDO Seidman, and turned to them once again when he needed auditors for EDII:
... PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS FOR THE COMPANY
The independent certified public accountants for the Company for the
fiscal year ended June 30, 1994 were Deloitte & Touche resigned as the Company's
public accountant on December 22, 1994. Deloitte & Touche's formal resignation
memorializes the Company's and Deloitte & Touche's discussions that they
mutually agreed that their auditor-client relationship would cease.
Contemporaneously, the Board of Directors took steps to engage BDO Seidman to
act as the Company's principal accountant.
The reports of Deloitte on the financial statements for the fiscal years
ended June 30, 1994 and 1993 contained an emphasis paragraph that the financial
statements and financial statement schedules were prepared assuming the Company
will continue as a going concern. The 1993 auditor's report stated that the
Company's recurring losses from operations and its noncompliance with debt
covenants raised substantial doubts about its ability to continue as a going
concern. The 1994 report stated that the Company's declining revenues and
recurring losses from operations raised substantial doubt about its ability to
continue as a going concern. The 1994 report also included an emphasis
paragraph describing certain amendments to the Common Stock Purchase Agreement
between the Company, and Daniel Dror & Co. ("DDC"), and designees. These
amendments resulted from certain transaction (i) between the Company and DDC and
designees, and (ii) initiated by Daniel Dror as Chairman of the Company's
investment committee, which were rescinded, amended or voided at various dates
during the subsequent interim period to the fiscal June 30, 1994 year end.
The decision to change accountants was approved by the Board of
Directors of the Company, including the Audit Committee of the Board of
Directors.
13
During the Company's two most recent fiscal years and subsequent interim
periods preceding the cessation of the relationship between the Company and
Deloitte there were no disagreements with Deloitte on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure. However, Deloitte believes that there is reportable event under
Regulation S-K Item 304(a)(1)(v) which requires disclosure.
On November 18, 1994 Deloitte advised the Company that it believed that
significant transactions executed by individual Board members or executive
officers prior to the Board of Directors deliberation and approval or without
safeguards such as shared responsibilities, results in a material weakness in
the Company's internal control structure and potentially exposes the Company to
material loss of assets or assumption of liability. Deloitte advised that the
Company should institute procedures to insure that the Board of Directors
approved significant transactions before they are consummated or there is a
prior approved guideline addressing the transaction. In its November 18, 1994
letter, Deloitte added that such control procedures will enhance effective
corporate governance and insure that the Company's assets and resources are
adequately safeguarded.
The Company does not believe that Deloitte's November 18, 1994 advice to
the Company was an event described in Item 304(a)(1)(v)(A) or (B) in that, in
management's opinion, Deloitte's November 18, 1994 letter does not address the
existence of those events, i.e., Deloitte has never advised the Company that the
internal controls necessary to develop reliable financial statements do not
exist or that information has come to Deloitte's attention that has made it
unwilling to be associated with the financial statements prepared by management..
How soon we forget. Or perhaps we don't really bother to read this silly SEC stuff...
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