"Despite a very challenging sales environment caused by a continuation of China's restrictive fiscal policy in 2011, we are encouraged by our fourth quarter results due to our efforts to expand into regional areas of China, the development of our marketing force and our restructuring efforts," said James Jun Wang, the company's chairman and CEO, in a press release issued after Monday's closing bell.
China-based companies with U.S. listings have faced increased skepticism since the emergence of
questions about accounting at a number of these companies in 2011.
Investors should be aware that Goldman Kurland & Mohidin LLP, SmartHeat's independent auditor, included an opinion in the company's Form 10-K filed on Monday that SmartHeat has a "material weakness" in the internal controls over its financial reporting.
The weakness in the Form 10-K is listed as a "Lack of technical accounting expertise among financial staff regarding (a) U.S. GAAP
generally accepted accountign principles
and (b) requirements of the PCAOB
Public Company Accounting Oversight Board
Auditing Standard No. 5 and COSO
Committee of Sponsoring Organizations of the Treadway Commission
in the assessment of internal control over financial reporting."
The company itself acknowledged the weakness in the filing, saying its management had "carried out an evaluation of the effectiveness of our internal control over financial reporting" and determined there was a weakness related to "a lack of sufficient internal accounting personnel with appropriate levels of knowledge, experience and training in generally accepted accounting principles in the U.S., or U.S. GAAP, for the preparation of financial statements in accordance with U.S. GAAP."
SmartHeat went on to say there was a "reasonable possibility that a material misstatement of our financial statements will not be prevented, or detected and corrected on a timely basis" in the filing, and that while its board was evaluating ways to address the issue, it's unlikely it will be able to "remediate" the weakness until it hires "qualified accounting staff or train our current accounting staff with the requisite U.S. GAAP experience."
Written by Michael Baron in New York.
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