UPDATE 1-NQ Mobile auditor seeks to expand scope of 2013 audit

Thu Jul 3, 2014 9:22am EDT

(Adds details, background, share move)

July 3 (Reuters) - NQ Mobile Inc's independent auditor has informed the company that it will need to expand the scope of its 2013 audit, the Chinese mobile security software maker said.

The company's shares were down 21 percent in premarket trading on Thursday.

The stock has been volatile after short-seller Muddy Waters Research Group called NQ Mobile a "massive fraud" in October, a charge the Chinese company rejected.

NQ responded to the short-seller's allegations by forming a special committee, which said in June that it had found no evidence of fraud.

The request from auditor PricewaterhouseCoopers Zhong Tian LLP to perform additional procedures related to their 2013 audit follows the release of the findings by the investigation committee.

NQ said on Thursday its board and audit committee were considering the auditor's request.

The company also said that the chair of its audit committee would step down due to personal reasons, effective July 6.

Short-sellers make money when the stock price of a company drops. They sell borrowed shares in the hope of buying them back at a lower price, returning them to the lender and pocketing the difference.

NQ's shares closed at $6.76 on Wednesday on the New York Stock Exchange. Up to Wednesday's close, the stock had lost more than two-thirds of its value since Muddy Waters' allegations. (Reporting by Supantha Mukherjee in Bangalore; Editing by Saumyadeb Chakrabarty)