Unqualified vs Qualified PWC Audit

[donlongava]

Do not know if there is a thread discussing “Qualified vs Unqualified” audit report. The 20-F should be reported soon, however I would be interested in comments regarding recent independent report in PR of 6/4.

(vii) The Investigation Team found that the Company, during the period before its May 2011 IPO, had some lax internal controls and informal business practices; to a limited degree, these informal business practices persist. These findings, however, do not reflect fraud.

While NOT fraud, could PWC report a “qualified” audit? Per my reading of a material weakness and without more information from NQ, could PWC interpret as a material weakness? Bottom line, a qualified report would be disastrous.

Deloitte writes about material weakness at: http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/Tax/us_tax_materialweaknesses_012011.pdf

Thanks

[cliu89]

That is for the period before its May 2011 IPO, nothing in the report say any issue with the current internal control and informal business practice.
Thus, I don't see an issue there for PWC to issue "unqualified" audit.

[TrueValueSeeker]

Short sellers can use anything to spread rumor. These guys has no morale at all.

[Bondguy8]

Do not know if there is a thread discussing “Qualified vs Unqualified” audit report. The 20-F should be reported soon, however I would be interested in comments regarding recent independent report in PR of 6/4.

(vii) The Investigation Team found that the Company, during the period before its May 2011 IPO, had some lax internal controls and informal business practices; to a limited degree, these informal business practices persist. These findings, however, do not reflect fraud.

While NOT fraud, could PWC report a “qualified” audit? Per my reading of a material weakness and without more information from NQ, could PWC interpret as a material weakness? Bottom line, a qualified report would be disastrous.

Deloitte writes about material weakness at: http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/Tax/us_tax_materialweaknesses_012011.pdf

Thanks

if NQ had to restate past financials (say 2011) would that effect the future outlook of the company?  MW claims are the reason that valuation is currently 1.5x rev. Find me another company with NQ growth prospects at their valuation.  Its at 10 because it was accused of having fake revenue and Zero cash.  D&T validated transactions from point of sale, through service provider, to bank account.  The cash is there.  Yes D&T said there could have been issues in the past, I don't deny that.  However nothing material. The only thing shorts can hang onto right now is that independent committees are never really independent.  It would be quite an embarrassment for D&T if PWC were to find something material after D&T offered their opinion.  NQ is a real company that deserves a multiple that approaches its peers.  PWC is taking there time as there is no deadline (not that PWC cares).  As long as PWC signs off and 20F gets filed, valuation will return.   Think of the large investment managers that can not or will not touch NQ until 20F is filed.  I repeat cheapest valuation around.

[admin]

Basically before 2011 the company was a start-up:

1. I think if you go through company records and practices with an 8 month inquiry in any start-up, especially one as fast growing (10+ acquisitions, numerous ventures in other markets) as this, you'll likely to find some stuff
2. A limited amount persist, not that surprising, fast growth tends to be a bit chaotic and cultures have a habit of persisting
3. Lose controls are not indicative of fraud is what the committee explicitly said
4. This all is a very far cry from MW's "90% of revenues are fake"
5. After 4 was already done away by Toro months ago, the shorts focused on Yidatong as their new argument of last resort. That too, has been explicitly debunked by the committee
6. When you see the proliferation of "arguments" on the short side, always a new one popping up after their previous one has been thoroughly debunked, you can bet it's just simply a fig leave for trading practices and accompanied scare mongering. I've seen this several times. They just throw stuff at the wall in the hope something sticks, and even the noise itself is taken as an exhortation to invest elsewhere.
7. We just had an 8 month detailed inquiry that essentially ruled out fraud. It verified all cash transactions over $1M and the proceeds of offerings. Controls used to be sloppy, and to a limited extent, they still are, that's all
8. Reason for PcW to resign? I don't think that's likely. Qualified opinion? Hard to tell, they might be inclined to clean their own doorstep first.

[cliu89]

Company explicitly stated that they will take the recommended steps to enhance their internal control. If we look up the definition of "qualified audit opinion", every single items in the list is invalid
for NQ to get a "qualified audit opinion". Please point me to any of the items that you think it is questionable for the list for "qualified audit opinion":

http://www.businessdictionary.com/defini...inion.html

[js253]

The entire "qualified opinion" concept was started by short sellers, trying to frame the yet-to-be-issued audit opinion to their advantage and to salvage their cause after some of the more egregious allegations were proven completely false. Isn't it kinda funny(read "hypocritical") that all the truth crusaders never fact check themselves and take responsibilities for all the 100% false statements they've made, and all the while calling other people liars.

Anyway, based on what the IA has revealed, it doesn't appear there is any reason for PwC to issue a qualified opinion. And NQ has repeatedly said that it DOES NOT expect to restate past financial statements(I doubt they'd put that in writing w/o consulting auditors first)

A stock as hated as NQ will always have rumor mongers and they'll be around even after 20F is released. What the stock is suffering from is a lack of buyers. NQ can't buy until after Q1 ER, and funds are likely sitting on the sideline until 20F. While IA does take away some of the stigma, as everyone else has said, the big one is clearly 20F.

[Mountainbiker]

Company explicitly stated that they will take the recommended steps to enhance their internal control. If we look up the definition of "qualified audit opinion", every single items in the list is invalid for NQ to get a "qualified audit opinion". Please point me to any of the items that you think it is questionable for the list for "qualified audit opinion": http://www.businessdictionary.com/defini...inion.html

Now we have a clear definition of what  Qualified Opinion is. thanks.

[Mountainbiker]

The entire "qualified opinion" concept was started by short sellers, trying to frame the yet-to-be-issued audit opinion to their advantage and to salvage their cause after some of the more egregious allegations were proven completely false. Isn't it kinda funny(read "hypocritical" that all the truth crusaders never fact check themselves and take responsibilities for all the 100% false statements they've made, and all the while calling other people liars. Anyway, based on what the IA has revealed, it doesn't appear there is any reason for PwC to issue a qualified opinion. And NQ has repeatedly said that it DOES NOT expect to restate past financial statements(I doubt they'd put that in writing w/o consulting auditors first) A stock as hated as NQ will always have rumor mongers and they'll be around even after 20F is released. What the stock is suffering from is a lack of buyers. NQ can't buy until after Q1 ER, and funds are likely sitting on the sideline until 20F. While IA does take away some of the stigma, as everyone else has said, the big one is clearly 20F.

Now, we need patience and wait for the filing. We are getting closer that each day goes by....

[donlongava]

Thanks to all. Like everyone else, will wait patiently for 20-F. Have been reading to deep into material weakness definitions and to a large degree forgetting about the definition of qualified opinion. Thanks for the reminder and comments.