A few weeks ago, Bronte Capital fund manager John Hempton published an investigation of Universal Travel Group (UTA), a Chinese travel company listed on the NYSE.Hempton concluded that the company appeared to be at least partially a fraud.
(Basically, UTA’s travel-booking web site, which the company had touted as providing a significant percentage of revenue, didn’t work. You can read all about that here >).
In any event, two weeks after Hempton published his investigation, the company’s auditor suddenly quit, as UTA just revealed in an SEC filing:
On September 29, 2010, we received a letter dated September 28, 2010 from our current independent registered public accounting firm, Goldman Kurland Mohidin, LLP (“GKM”), informing us that they had resigned as our independent registered public accounting firm effective with the commencement of business on September 27, 2010. No reason was given as to the cause for their resignation.
GKM was only recently appointed as our independent registered public accounting firm on September 1, 2010, and had not yet commenced providing any accounting services to us…
UTA has since appointed another auditor–another tiny firm that most people have never heard of. In its press release announcing the appointment of the new auditor, the company made no mention of the fact that its prior auditor had suddenly quit.
Now, we’re just using common sense here, but it’s hard to imagine any scenario in which a new auditor would be hired on September 1st, begin looking into the company’s books, and then suddenly quit with no explanation four weeks later… other than that the auditor was running away screaming.
If there’s another explanation, we invite UTA to provide it. We’ll be happy to publish it here.
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