China MediaExpress Holdings, Inc. (fka CCME)

[Texbanker]

A lot of growing companies face challenges with internal controls. High growth quickly swamps internal systems designed to monitor, count, collect, maintain, and report a lot of facets of the business. While everyone was excited about CCME's reported growth, few questioned whether or not the systems they had in place could effectively manage the growth. This does not lead to fraud per se, but it usually results in inaccurate finacial reporting. Auditors will bring this out and require onerous changes to protect themselves as they are already in the middle of it and concerned about thier situation. This is a point where a lot of small companies will change auditors, sometimes frequently. Believe me, research it and you will find quite a few companies, all over the world, that are changing auditors, all the time. Not all are fraudulent companies, very few are. They are just going through growing pains.
I find it strange how the public investing mind goes from one extreme to the other real fso quickly. Its the greatest company ever to the biggest fraud since Bernie Madoff. The investor psychology displayed in the CCME case is one that should be studied and documented imo.