One day shy of the one year anniversary date, the accountancy is scrapping a “trial merger” and is splitting back into Frost LLP of Little Rock, Ark. and Raleigh, N.C. and Moore Stephens, which is headquartered in Brea, Ca.
Here is the official announcement.
The Moore Stephens side has been in hot water for a series of audits in its Chinese reverse-merger client base that appear to defy both common sense and financial probability. This report on RINO International is a case in point with the company acknowledging much of its revenue base is fictitious.
FI.com has released several reports questioning the likelihood of the financial statements of Harbin Electric being accurate. In an interesting aside, the Moore Stephens (signing as Frazer Frost) firm audited the financials of not only Harbin, but SIMO, a manufacturing company it bought in October 2009. The transaction‘s timeline is the kind of thing that raises eyebrows: Announced on October 6, the deal closed on October 19. The financials were signed on October 21. This breaks all established land-speed records for merger closing and transaction audits.
Dan Peregrin, the general partner of Frost, told FI.com that, “There was definitely a culture clash between the [two firms.] We do a lot of agricultural audits and work in that industry. They have been pushing out into Asia. We didn’t see the opportunity and reward they did there.”
Asked about the mounting questions on audits done on Chinese reverse merger companies, Peregrin said, “I won’t say that it wasn’t a concern. There is a lot of [issues] right now in that practice area and we just felt it would be smarter to wish them luck and stick to our practice areas.”