an interesting part of that document re these dudes
Review of Audit Engagements
The inspection procedures included a review of aspects of the Firm's auditing of
financial statements of six issuers. The scope of this review was determined according to the Board's criteria, and the Firm was not allowed an opportunity to limit or influence the scope.
The inspection team identified what it considered to be audit deficiencies.8/ The
deficiencies identified in all six of the audits reviewed included deficiencies of such significance that it appeared to the inspection team that the Firm did not obtain sufficient competent evidential matter to support its opinion on the issuer's financial statements.9/
Those deficiencies were –
(1) the Firm's failure to identify, or to address appropriately, a departure from
GAAP that related to a potentially material misstatement in the audited financial
statements concerning the valuation of common stock issued to effect a business
combination;
(2) the failure, in three audits, to evaluate whether certain aspects of
transactions involving the issuance of convertible debt and detachable stock
purchase warrants were accounted for properly;
(3) the failure to test the existence and valuation of additions to certain
capitalized expenditures;
(4) the failure to evaluate the appropriateness of recognizing revenue from
certain transactions with a joint venture;
AI
