Now, Questions About BIDZ.Com's Auditors

Bidz.com (BIDZ) should seriously consider replacing Stonefield Josephson Inc. as its auditors. According to a March 2007 Public Company Accounting Oversight Board (PCAOB) Inspection Report, Stonefield Josephson, Inc. was cited for significant deficiencies in five of thirteen audits reviewed or about 38.5% of audits sampled. See below:

The scope of the inspection procedures performed included reviews of aspects of the performance of 13 of the Firm's audits of the financial statements of issuers. Those audits and aspects were selected according to the Board's criteria, and the Firm was not allowed an opportunity to limit or influence the selection process. The inspection team identified matters that it considered to be audit deficiencies.

The deficiencies identified in five of the audits reviewed included deficiencies of such significance that it appeared to the inspection team that the Firm did not obtain sufficient competent evidential matter to support its opinion on the issuer's financial statements.

Note: Bold print and italics added by me. Full report here.

Unfortunately, the PCAOB report does not identify which company audits failed inspection, even though many people have questioned such a policy. However, failing to "obtain sufficient competent evidential matter to support its opinion," in five of thirteen audits inspected, raises a red flag about the overall quality of Stonefield Josephson's audits.

This blog has written extensively about Bidz.com's inventory accounting disclosures and possible violations of Generally Accepted Accounting Principles in the company's accounting for inventories (details here, here, and here). The SEC started investigating such disclosures after I alerted them.

Bidz.com is besieged by a flurry of lawsuits, seeking class action status, alleging securities fraud by the company and David Zinberg (CEO and President), based on issues raised in reports by short seller Citron Research. In addition, the company is being sued for alleged shill bidding on its web site.

Disclosure: I am a convicted felon and a former CPA. I pleaded guilty to three felonies for my role in the Crazy Eddie fraud as the former criminal CFO of the company.

I do not own any Bidz.com securities long or short.

Comments

[107Sid:]

Sam Antar is providing a valuable service to investors with his investigative work, not withstanding past trangressions (for which he has paid a dear price). Thanks Sam and keep up the good work.

Jun 25 09:46 AM

[chris_dress:]

sam:

As far as I know, you have never revealed who is paying for your valuable services.

why not let us all know whose ax you are grinding?

Jun 25 01:18 PM

[jakkaye:]

I'm also a CPA. I have no criminal record. I think Sam is all wet. PCAOB was established in 2002. The financial statements audits that were reviewed by PCAOB are probably from the years 2004 and 2005. The issues involved do not appear to be significant or material in regards to Bidz's balance sheet. Many accounting firms and Big Four firms were pointed out for deficencies in the early years of PCAOB. Understanding COSO is an evolution of learning what the SEC really wants in their audits. I still see this accounting firm as a registered member. They have not be sanctioned by PCAOB. The firm apparantly has fixed their auditing procedures and workpapers and did not retract any of their clean opinions. I think this whole matter is a smear job.

On Jun 25 09:46 AM 107Sid wrote:

> Sam Antar is providing a valuable service to investors with his investigative
> work, not withstanding past trangressions (for which he has paid
> a dear price). Thanks Sam and keep up the good work.

Jun 25 09:44 PM

[Veneratio:]

Why aren't you short then, Sam...?

Jun 29 06:43 PM

[User 305589:]

the hedge fund friends he, along with his infamous buddy gary weiss is catering to, may well be short...


On Jun 29 06:43 PM Veneratio wrote:

> Why aren't you short then, Sam...?

Jul 01 04:59 AM

[Sam E. Antar:]

Thank you.


On Jun 25 09:46 AM 107Sid wrote:

> Sam Antar is providing a valuable service to investors with his investigative
> work, not withstanding past trangressions (for which he has paid
> a dear price). Thanks Sam and keep up the good work.

Jul 07 10:40 PM

[Sam E. Antar:]

I am 5' 7".


On Jun 29 06:43 PM Veneratio wrote:

> Why aren't you short then, Sam...?

Jul 07 10:42 PM

[Sam E. Antar:]

Bidz.com is a freebie to get me into heaven for past sins, though I doubt I can ever make up for my past sins. However, please feel free to share your thoughts with the SEC LA office. I won't mind visiting them.


On Jun 25 01:18 PM chris_dress wrote:

> sam:
>
> As far as I know, you have never revealed who is paying for your
> valuable services.
>
> why not let us all know whose ax you are grinding?

Jul 07 10:45 PM