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Tuesday, August 11, 2009

Perception Matters - AOB Hires Big Four Auditor

American Oriental Bioengineering (AOB, $5.26) announced this morning that it hired Ernst & Young Hua Ming ("EY") as the company's independent registered public accounting firm for the current fiscal year (end December). EY replaces Weinberg & Company, P.A., which says goodbye on good terms with no disagreement or outstanding issues.

We believe the news was a long time in coming and adds credibility to both the company and its reported financial results. In our view, the implied "rubber stamp" of approval from a big four auditor (to take on AOB as a client) further discredits recent short seller claims, which the company also answered last Friday (please see our earlier post).

While many small accounting firms are certainly very capable -- right or wrong -- we suspect that investor perception of accounting accuracy/integrity is improved for companies with books audited by a major accounting firm.

Happy investing,

Jeffrey Walkenhorst
CommonStock$ense

Disclosure: long AOB.

© 2009 Jeffrey Walkenhorst
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1 comment:

  1. I saw this as well and thats why the stock was up today. People worry about credibility about chinese names and that was some bullish news out of AOB today. I like your posts about AOB and I am currently long as well. Good luck with your position as well.

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