Universal Travel Group: auditor resigns edition.
Universal Travel Group has lost its auditor - a small firm Windes and McClaughrey. Windes looks reputable - a cursory look through the SEC database as to companies they have audited turns up nothing untoward.
So I was surprised when they accepted the audit assignment. After all my views about Universal Travel are well known. I even asked how we would test whether the $43 million stated cash balance at NYSE:UTA was really there.
The auditor asked the same question. Here is the key section from the auditor-departs 8K filing.
The following reportable disagreements occurred within the period from Windes' engagement through the date of its resignation, which if not resolved to the satisfaction of Windes, would have caused it to make a reference to the subject matter of the disagreements in connection with its report.
Windes had informed the Company in its resignation letter that it was no longer able to complete the audit process. Windes stated this was due in part to Management and/or the Audit Committee being non-responsive, unwilling or reluctant to proceed in good faith and imposing scope limitations on Windes' audit procedures.
Windes also stated that Windes had lost confidence in the Board of Directors' and the Audit Committee's commitment to sound corporate governance and reliable financial reporting.
Prior to its resignation, Windes raised the following issues (some of which may be considered to be disagreements) encountered during the audit, including issues related to the authenticity of confirmations, a loss of confidence in confirmation procedures carried out under circumstances which Windes believed to be suspicious; issues concerning the lack of evidence of certain tour package contracts and related cash payments.
So the auditor wanted to check balances (presumably though I am guessing - cash balances) and considered the procedures the company wanted to use to confirm the balances "suspicious". Moreover management were unwilling or reluctant to proceed in good faith and imposed limits on what Windes can do.
Universal Travel is going through the circus of finding another auditor - their sixth. You could see through this company from a couch in Bronte or from a desk at the NYSE or any SEC office. Everything that I did to demonstrate problems with this company could be done without visiting China - and yet the stock was never suspended, kicked to the Pink Sheets or anything else. Nah - the NYSE kept collecting listing fees.
The NYSE it seems has no concern for its reputation.
It is not as bad as Singapore (where prospectuses for fraudulent Chinese companies were handed out in shopping centers) but hey - what is this - a race to the bottom?
John