Have you ever actually bothered to READ it? Or do I have to post it AGAIN? YES, Deloitte RESIGNED.
Um, let's do it differently: check out this extremely clear and educational post by Wireless Wonk:
To: Janice Shell (1235 )
From: wireless_wonk
Friday, Jul 17 1998 2:02AM ET
Reply # of 1263
Regarding Daniel Dror's former stewardship of Microtel International.
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 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Dror as Chairman of the Company's investment committee, which were rescinded, amended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.
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.
www4.edgar-online.com
Here is Regulation S-K.
Standard Instructions for Filing Forms under the Securities Act of 1933, Securities
Exchange Act of 1934 and Energy Policy and Conservation Act of 1975
Regulation S-K
Item 304 - Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
a.
1. If during the registrant's two most recent fiscal years or any subsequent interim period,
an independent who was previously engaged as the principal accountant to audit the
registrant's financial statements, or an independent accountant who was previously engaged
to audit a significant subsidiary and on whom the principal accountant expressed reliance in
its report, has resigned (or indicated it has declined to stand for re-election after the
completion of the current audit) or was dismissed, then the registrant shall:
i. State whether the former accountant resigned, declined to stand for
re-election or was dismissed and the date thereof.
ii. State whether the principal accountant's report on the financial
statements for either of the past two years contained an adverse opinion or a disclaimer of
opinion, or was qualified or modified as to uncertainty, audit scope, or accounting
principles; and also describe the nature of each such adverse opinion, disclaimer of
opinion, modification, or qualification.
iii. State whether the decision to change accountants was recommended or approved by:
A. Any audit or similar committee of the board of directors, if the issuer has such a
committee; or
B. The board of directors, if the issuer has no such committee.
iv. State whether during the registrant's two most recent fiscal years and any subsequent
interim period preceding such resignation, declination or dismissal there were any
disagreements with the former accountant on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which disagreement(s), if not resolved to the satisfaction of the former accountant, would
have caused it to make reference to the subject matter of the disagreement(s) in
connection with its report. Also,
A. describe each such disagreement;
B. state whether any audit or similar committee of the board of directors, or the board of
directors, discussed the subject matter of each of such disagreements with the former
accountant; and
C. state whether the registrant has authorized the former accountant to respond fully to the
inquiries of the successor accountant concerning the subject matter of each of such
disagreements and, if not, describe the nature of any limitation thereon and the reason
therefore.
The disagreements required to be reported in response to this Item include both those
resolved to the former accountant's satisfaction and those not resolved to the former
accountant's satisfaction. Disagreements contemplated by this Item are those that occur at
the decision-making level, i.e., between personnel of registrant responsible for presentation
of its financial statements and personnel of the accounting firm responsible for rendering
its report.
v. Provide the information required by paragraph (a)(1)(iv) of this item for each of the kinds
of events (even though the registrant and the former accountant did not express a
difference of opinion regarding the event) listed in paragraphs (a)(1)(v) (A) through (D) of this
section, that occurred within the registrant's two most recent fiscal years and any
subsequent interim period preceding the former accountant's resignation, declination to
stand for re-election, or dismissal ("reportable events"). If the event led to a disagreement
or difference of opinion, then the event should be reported as a disagreement under
paragraph (a)(1)(iv) and need not be repeated under this paragraph.
A. The accountant's having advised the registrant that the internal
controls necessary for the registrant to develop reliable financial statements do not
exist;
B. The accountant's having advised the registrant that information has
come to the accountant's attention that has led it to no longer be able to rely on
management's representations, or that has made it unwilling to be associated with the
financial statements prepared by management;...[continues]
law.uc.edu
The way the company has phrased the disagreement, it would appear to fall under
304(a)(1)(v)(A) since Mr. Dror's action's seemed to short-circuit the normal control
procedures one would expect in a public corporation. Since the negotiations were
conducted with "related parties" it makes it more of a concern. However, since the
company specifically mentions section 304(a)(1)(v)(B) in their response, it is possible that
Deloitte had concerns under this subsection and choose to retire from further representation
and the amicable language is typical "spin" on behalf of both parties. Yet, Deloitte did
continue to sign off on the audit.
The new management of Microtel and Mr. Dror are currently in litigation.
From the April 1998 10-Q for Microtel International, Inc.
DANIEL DROR V. MICROTEL INTERNATIONAL, INC.
In November 1996, the Company entered into an agreement(the Agreement") with the
former Chairman of the Company, which involved certain mutual obligations. In December
1997, the former Chairman defaulted on the repayment of the first installment of a debt
obligation under the Agreement. Also in December 1997, the former chairman of the
Company filed suit in the District Court for Galveston County, Texas alleging the Company
has breached an alleged oral modification of the Agreement. In January 1998, the Company
answered the complaint denying the allegation and the matter is currently being litigated in
Texas. The Company believes that the former Chairman's claim is without merit and intends
to vigorously defend itself and intends to assert its own claims against the former chairman
by way of counterclaim or separate action.
sec.gov; |
