China Reverse Mergers Continue Wild Ride
Universal Travel (UTA), whose shares have been halted since April 12, became the latest Chinese small-cap company to announce that its auditor had resigned after the firm raised accounting red flags.
The auditor, Windes & McClaughry, of Long Beach, Calif., ran across the alleged problems while auditing Universal Travel's 2010 financial results in preparation for filing its 10-K annual report with the Securities and Exchange Commission, the company said in a disclosure to the SEC late on April 14.Universal Travel had already divulged, back on March 31, that it wouldn't be able to file its 10-K on time. Windes couldn't immediately be reached for comment. A Universal Travel spokesperson, at the investor relations firm Christensen, didn't respond to a request for comment. The problems Windes allegedly found were described vaguely by Universal Travel in its 8-K disclosure filing. For example, Windes told the company before it resigned that it had run into "issues related to the authenticity of confirmations" as well as "lack of evidence of certain tour package contracts and related cash payments," according to the 8-K. Windes also suffered a "loss of confidence in confirmation procedures carried out under circumstances which Windes believed to be suspicious," the 8-K said. Windes decided to quit when "it was no longer able to complete the audit process," according to the 8-K. "Windes stated this was due in part to Management and/or the Audit Committee being non-responsive, unwilling or reluctant to proceed in good faith and imposing scope limitations on Windes' audit procedures." In the filing, Universal Travel disputed Windes' claim that it had blocked the firm's ability to conduct the audit. "We believe that we have acted responsively, prudently and in good faith to address the numerous issues raised by Windes during the entire audit process," the company said.
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