PCAOB bars Colorado firm from auditing

The Public Company Accounting Oversight Board revoked the registration of Gries & Associates and the Denver-based firm's founder, Blaze Gries, while imposing a $65,000 fine for violating PCAOB auditing standards, leading to multiple financial restatements by a client.

The audits involved Tingo, an agriculture fintech company offering a mobile app service that allowed farmers to sell their crops online, according to a disciplinary order posted Tuesday by the PCAOB. In 2021, Tingo disclosed that its operations in Nigeria generated the substantial majority of its revenue. The Securities and Exchange Commission charged Tingo's founder in December with committing massive fraud. 

When doing a fiscal year 2021 audit of Tingo, Gries and his firm failed to respond to warning signs that Tingo's financial statements materially misstated billions of dollars of goodwill and tens of millions of dollars of stock-based compensation expense, according to the PCAOB. The company then went through multiple restatements of its 2021 financial statements.

Gries and his attorney did not respond to requests for comment.

The PCAOB found Gries and his firm failed to evaluate Tingo's basis for accounting for a significant business combination as an acquisition, as opposed to a reverse acquisition, even though they saw public filings and emails from Tingo management referring to the combination a "reverse acquisition" and "reverse merger." The firm and Gries failed to appropriately respond to these and other red flags warning that Tingo erroneously accounted for the combination. 

Four months after the firm released its audit report, Tingo restated its 2021 financial statements to correct the error, leading to removal of approximately $3.6 billion in goodwill from its previously reported total assets of $6.5 billion, a 56% reduction in assets.

During the same audit, the firm and Gries also failed to resolve warning signs that Tingo had incorrectly reported the entirety of the $220 million in stock compensation it had issued in 2021 as an expense in 2021, instead of amortizing the expense over the years in which the stock was scheduled to vest. 

"Not only did the firm and Gries fail to obtain sufficient evidence that the stock actually had been issued, they also relied on management representations that the vesting period was only one year, while failing to resolve contradictory disclosures in Tingo's Form 10-K that identified the vesting period as two years," said the PCAOB. 

Eight months after the firm released its original audit report, Tingo again restated its 2021 financials, which included the deferral of $66 million in stock compensation expense from 2021 to future years.

On top of that, Gries and his firm failed to timely file Forms AP, "Auditor Reporting of Certain Audit Participants," due in 2022 for 10 audit reports associated with eight issuer audit clients, one of which was Tingo.

"Auditors must respond appropriately when they encounter warning signs," said PCAOB chair Erica Williams in a statement Tuesday. "The PCAOB will not hesitate to take action when investors are put at risk."

The SEC also found problems with Tingo's 2022 financials, saying the company's fiscal year 2022 Form 10-K filed in March 2023 reported a cash and cash equivalent balance of $461.7 million in its subsidiary Tingo Mobile's Nigerian bank accounts, when in reality, those same bank accounts allegedly had a combined balance of less than $50 as of the end of fiscal year 2022. 

Gries and his firm settled with the PCAOB without admitting or denying the findings. The PCAOB barred him in the settled disciplinary order from associating with a registered public accounting firm, but he can petition for termination of the bar after one year. He and his firm were also ordered to pay a penalty of $65,000.