For a company to say it can not because of a dirty shell etc. is just a flat out lie. Any financial statement can be audited. The more likely explanation of not going this step is that they couldn't find an auditor willing to take on the engagement or the results of the audit was negative, therefore it would be better to hide behind the non-reporting requirements as a pink sheet company.
Auditor's job is to renders an opinion on the fairness of the financial statement and financial statement disclosures in accordance with GAAP. Concurrent with the financial statement, the auditor also renders an opinion on the company's internal control.
The Independent Auditor's report, is standard 3-4 paragraphs long depending on the opinion issued. Every sentence in the paragraph is standard wording defined by GAAP. The final paragraph is called the opinion paragraph which states one of 4 auditor's opinions:
1. Unqualified - "Financial statement is fairly stated in accorance to GAAP in all material respects"
2. Qualfied - "Financial statement is fairly stated in accordance to GAAP except for ____ item(s) "
3. Disclaimer - we can not render an opinion due to scope limitation (lack of independence, material information missing, management not cooperating etc..)
4. adverse - "financial statement is NOT fairly stated in accordance to GAAP"
These opinions pretty much covers all possible scenarios.
Auditor's follow the Professional standard promulgated by PCAOB (Public Accounting Oversight Board) REQUIRING they not take on clients where management lacks integrity (not good for many pinkie operators). This can be a major problem for many pinks have problems.
Also Public Auditors are required to report directly with the audit committee (who MUST all be members independent of management) and the board of governors. Since for CTBG, GFCI, their 1 and the same, they will not deal with such an entity that lack separation of duties (no checks and balances).
The excuse given for CTBG audit is B.S IMHO. The likely reason is their inability to find an audit firm willing to engage an audit due to the reputation of the principal (e.g. Jim Dial) and the separation of duties (no independence between management and board.
Assuming such an organization is in place, and integrity of management is not in question, missing statement from a defunct company out of business (shell corp) should never be an issue mainly because they would not have any significant assets or income. In the case of CTBG, the shell company filed bankruptcy before going defunct. There would be no income (P & L) statement for that particular period. Most of what would be on the books would come from CTBG (or the operating company). Even if there was something on the books GAAP would require it be written down due to impairment.
