Regarding the Auditor Resignation:
Known: Marcum LLP resigned
Known: Marcum LLP gave no reason
Known: Marcum LLP was sanctioned by CPAB
Known: Marcum was explicitly prevented in the order that they cannot take on new ‘risky’ clients (risky is not defined).
Known: Marcum LLP had two audits checked (technically the audit was audited) and this caused CAPB to issue their order
Known: Marcum LLP is not licensed in some provinces
Known: Marcum LLP has not performed a completed audit on Voxtur
From this people can insinuate and surmise.
Insinuation: Voxtur is singled out as a sole bad apple and they are the cause of Marcum LLP’s issues as they resigned without giving reasons. Therefore the reasons for the resignation are problems with Voxtur - not Marcum LLP.
Insinuation: There were two audits that were conducted and that Voxtur was one of the bad audits which caused Marcum LLPs issues and why Marcum LLP resigned
Summary of Insinuations: Voxtur is the cause of Marcum LLPs problems and they were one of the audits that was audited by CPAB that was the reason for the order
Rebuttal of the Insinuations:
- Voxtur has not been audited yet - how could they then be one of the reviewed audits? Answer: They can’t be one of the reviewed audits.
- Auditors typically give reasons for a resignation - but that is when they resign when the problem resides with the client - not with the Auditor as is the case here.
What I SURMISE:
- They DID NOT HAVE A LICENSE IN ONTARIO. If they are not licensed then they must cease doing audits in the regions where they are not licensed. The CPAB does not have to make this statement explicitly - as it is, im my opinion, understood that a audit firm cannot do audits if they are not licensed. Therefore they MUST RESIGN as they are NOT LICENSED. This is to be understood and need not be stated explicitly.
1a) The letter of resignations typically deal with causes that are focused on the client being audited - not on the auditor itself. Given that - the easiest course is to simply give no reason at all.
1b) There was some chatter about KPMG resigning. When an auditor is replaced they must resign. And they must state if there are any issues with the client - or no issues.
- There is no evidence in any way, shape or form that any issue resides with Voxtur. All evidence and REASONABLE interpretation of the evidence points to the issue being 100% and issue of Marcum LLP.
Ok - that deals with the information that is available regarding what HAS HAPPENED.
Going forward speculation:
There has been speculation that it will take 6 months to get an audit done.
I think this is fear mongering - I am all for reasonable criticisms and informed reasons for a long-delay - but in this instance it is simply not reasonable to assume this.
Here are the reasons why I think it will take materially less time than 6 months and COULD BE done in a MUCH SHORTER time than that:
- This is not Voxtur’s first audit
- They have a VERY EXPERIENCED CFO - who was a former partner at KPMG
- Their previous auditor was KPMG. This is a VERY CRITICAL part of the reasoning for why I think they will have a shorter time to get an audit done:
— They are coming from a big 4 Accounting firm. Which means there processes and systems will be very robust.
— The Audit really only audits the Balance sheet at a given point in time. This Balance sheet is built on testing the veracity of the inputs such as revenue recognition, timing of expenses, pricing of assets and liabilities.
— The processes and systems are checked with a variety of methods - typically by random samples. If these prove to be robust in the first sampling then they typically do not need to check another sample. This shortens the time
— Much of the previous assumptions will not have to be changed as they were likely properly done and handled with conservative assumptions. This too will shorten the time
— Given that KPMG was the previous auditor there is a lot of veracity given to the previous audits and numbers.
So in short the processes, systems, assumptions and previous auditor will make the current audit easier to conduct.
For this reason too - there will likely be a good number of auditors that would likely want to take on Voxtur on as a client.
And given that there was already a lot of work done on the audit - there may well be a reasonable amount of work that can be relied upon. And if not completely relied upon at least the ability to gather and retest the information is readily at hand.
Other criticisms that I think are spurious:
Marcum is a bad audit firm - I think that is not a fair assessment they are mid-sized US firm. And seemingly well-regarded.
They got rid of KPMG because they wanted an easier audit. This too is, in my opinion, a spurious argument. There is a right-size audit firm to be with. Voxtur is too small for a Big 4 Audit firm - they don’t get the right amount of servicing. I think that the size of Marcum LLP was a good match. I suspect that the new Audit firm will share characteristics of a Marcum LLP: Mid-sized, national, recognizable brand audit firm.
Again, I am all for criticisms of Voxtur - I have many myself but they should at least be grounded in reality and not always about looking at everything as a nefarious conspiracy from management.
