The Auditor Who Didn’t

The Reverse Merger Report’s lead story this month is about auditor Michael Moore (no relation to the film director). The Las Vegas CPA was accused of fraudulently auditing over 300 shell companies (disclaimer: one was a client of mine). Or rather that he simply didn’t audit. He had no real staff but hundreds of clients doing quarterly SEC filings.

The SEC sued him and settled for a little over $300,000. It is unclear whether more action (ie criminal) is forthcoming, or whether his clients are going to do anything, or whether he will retain his CPA license. The PCAOB has also taken away his right to audit public companies. Meanwhile, the SEC has sent a letter to every public company he audited (including my client) ordering them to reaudit anything Moore did. For little shell companies with limited resources, this is a frustrating thing that has simply victimized these shell owners.

At least my client hadn’t completed a reverse merger yet. Others who have now have to postpone financings or other activities until the reaudit is complete. Moore apparently built his business by dramatically undercutting the prices of competitors. This should tell you something, gang.  If there’s a lesson at all it is this. If the auditor doesn’t do his or her job, there could be trouble down the road. And the old adage: you get what you pay for. Which doesn’t mean you have to spend a fortune. Believe you me, the auditing firms, like all service businesses these days, are getting very competitive on pricing to get business. But if four respected firms are in a certain reasonable range, and one offers to do it for 2/3 less, be very very cautious.

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