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UPDATE 2-China MediaExpress says auditor quits, CFO resigns
March 14, 2011 / 8:19 PM / in 7 years

UPDATE 2-China MediaExpress says auditor quits, CFO resigns

* Says accounting firm Deloitte Touche Tohmatsu quits

* CFO Jacky Lam resigns

* Says to delay filing annual report (Adds details about company, background, NEW YORK dateline, bylines)

By Himank Sharma and Dena Aubin

NEW YORK, March 14 (Reuters) - China MediaExpress Holdings CCME.O said its auditor severed ties with the company, citing an inability to rely on management, more than one month after a short seller accused the advertising company of inflating results.

China MediaExpress, accused of overstating its revenue by online research firm and short seller Muddy Waters, also said Chief Financial Officer Jacky Lam resigned, and the company will delay filing its annual statements. [ID:nN03116108]

Deloitte Touche Tohmatsu, the auditor, recommended an independent probe into issues it encountered during its audit, China MediaExpress said in a statement.

The Hong Kong, China-based company said it authorized an independent committee to begin such an investigation.

Trading in shares of China MediaExpress had been halted since Friday morning, when they last traded at $11.88 on Nasdaq.

China MediaExpress sells airtime on company-operated TV screens on public transport buses in China. The shares had fallen 33 percent when Muddy Waters said on February 3 the company had far fewer buses than it claimed.

It is one of several Chinese companies whose U.S. shares have been battered by accusations of misleading accounting.

“Any time an auditor resigns, it’s serious,” said Drew Bernstein, co-managing partner at Marcum Bernstein and Pinchuk LLP, an auditing firm based in China.

“They’re basically telling you they have a lack of confidence in the financials and the information that was furnished to them,” he added.

Also on Monday, China Agritech Inc CAGC.O said it dismissed Ernst & Young Hua Ming as auditor, saying a service agreement it had with another Ernst & Young branch office raised doubts about the auditor’s independence. For details click on [ID:nASA01R3V].

Shares of China MediaExpress, which have been halted on Nasdaq since Friday, have lost almost half of their value since the Muddy Waters research report was published. (Reporting by Himank Sharma; Editing by Richard Chang)

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