1. Potentially the previous auditors refused to sign the books because of discrepancies or lack or internal controls or the auditors and management couldn’t agree on the final audit report
2. If the previous auditors refused to sign or resigned from their role as statutory auditors there should have been a market announcement. Instead we have to this announcement as they have been replaced by a new audit firm
3. The announcement refers to internal controls in China Ops which is not a good sign. Hopefully it is not material to the SP but the very fact that the management mentioned it isn’t encouraging.
4. The only positive for me is that they have appointed a Big4 auditor which shows the management is serious about the long term business even though in the short term the auditors may rip open the internal controls and books and come with a bunch of significant findings. However for a new company to get enough understanding of the books and perform their audits will likely take 1-2 months at the earliest, so I wouldn’t be looking to trade soon.
I am down 30% on the company but even if the trading opened lower (whenever that is) the appointment of Big4 auditor and their management’s first fin statement post that will be an indication of things to come. Keep an eye out for the auditor’s report and management commentary when it comes out.
EHH Price at posting:
14.0¢ Sentiment: Buy Disclosure: Held
