ITEM 4.01
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CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT.
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(a) On December 19, 2012, General Steel
Holdings, Inc.’s (the “Company”) Audit Committee of the Board of Directors approved the dismissal of PricewaterhouseCoopers
Zhong Tian CPAs Limited Company (“PwC”), as its independent, registered public accounting firm. The Company notified
PwC of its dismissal on December 19, 2012.
PwC was engaged as the Company’s
independent registered public accounting firm on December 31, 2010 for the fiscal year ended December 31, 2011. As previously
disclosed, PwC began providing services in the second fiscal quarter of 2011. Through the date of its dismissal by the Audit
Committee, PwC had not completed its audit or provided a report on the financial statements of the Company for such period,
or any other period.
In connection with the audit of the
Company’s financial statements for the fiscal year ended December 31, 2011 and the interim periods through the
date of PwC’s dismissal, there was one disagreement between the Company and PwC, which was resolved by the Company
seeking guidance from the Office of Chief Accountant of the Securities and Exchange Commission (the “OCA”) and
the OCA provided guidance on April 20, 2012 to the satisfaction of the Company and PwC. The disagreement pertained to the
accounting treatment for certain costs incurred and reimbursements received in connection with the construction of equipment
by Shaanxi Iron and Steel Group, Co., Ltd. Prior to the resolution of the disagreement, the Company’s Audit Committee
discussed the above disagreement with PwC. The Company has also authorized PwC to respond fully to any inquiries of the
Company’s successor independent registered public accounting firm concerning the subject matter of
the disagreement.
The Company was also advised by PwC of
certain events reportable in accordance with Item 304(a)(1)(v) of Regulation S-K. PwC advised the Company that the
Company did not maintain effective internal control over financial reporting due to material weaknesses in
the Company’s internal controls over financial reporting related to (1) the lack of sufficient financial personnel
with an understanding of U.S. GAAP and (2) contract management, specifically in the areas of preparation, documentation and
maintenance of contracts. The Company’s Audit Committee discussed such reportable events with PwC and has
authorized PwC to respond fully to any inquiries of the Company’s successor independent registered public accounting
firm concerning the reportable events.
In addition, PwC identified
certain control deficiencies as follows: (1) a lack of sufficient accounting personnel at the Company’s most
significant subsidiary, (2) a lack of policies and procedures to identity and record adjustments due to different periods
used for the month end closing date compared to the actual month end, (3) a lack of review of the calculations and
reconciliations used to record long-term investments and the related income/loss from its equity method investment, and
(4) a lack of review of the calculation of the amount and timing of recording transfers from construction in progress to
property, plant and equipment.
PwC also noted in its letter that PwC
had not expanded audit procedures around the Company’s assessment of its ability to continue as a going concern and the
Company’s impairment analysis for long-lived assets. In addition to the Company’s own procedures and analysis,
the Company engaged independent experts to provide analysis and assessments of these matters. The independent experts
concluded that the Company is able to continue as a viable business and there were no issues with
impairment for long-lived assets. PwC has not reviewed the conclusions of these independent experts although the Company has
offered these findings to PwC. The Audit Committee discussed both issues with PwC and has also authorized PwC to respond
fully to any inquiries of the Company’s successor independent registered public accounting firm concerning these
issues.
The Company provided
PwC with a copy of the disclosures in the
Original 8-K
and requested that PwC furnish the Company
with a letter addressed to the Securities and Exchange Commission stating whether or not PwC agrees with the Company’s statements
included in this Item 4.01 as set forth in the Original 8-K. The Company received a copy of such response letter from PwC
on January 4, 2013 and such
letter is filed as exhibit 16.1 to this Current Report on Form 8-K, as amended, and is incorporated
herein by reference.
The reportable events that
PwC identified in its letter, some of which the Company and independent experts disagree with as aforementioned, solely
relate to the Company’s internal control over financial reporting, and the Company was never advised by PwC that any of
these items would prohibit it from completing an audit of the Company and they will not prohibit the Company’s
current independent registered public accounting firm’s ability to complete the Company’s 2011 audit. The Company
and its current independent registered public accounting firm are working diligently on completing the 2011 audit. The
Company expects to file its Form 10-Q for the Quarters Ended June 30, 2011 and September 30, 2011 around February 1, 2013 and
its Form 10-K for the Fiscal Year Ended December 31, 2011 around February 15, 2013. The Company has advised the Securities
and Exchange Commission and the New York Stock Exchange of these expected filing dates.
(b) On
December 19, 2012, the Audit Committee of the Company’s Board of Directors approved the engagement of Friedman LLP (“Friedman”)
as the Company’s independent registered public accounting firm. During the two most recent fiscal years and the
interim periods preceding the engagement, the Company has not consulted Friedman regarding either: (i) the application of
accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered
on the Company’s financial statements, and either a written report was provided to the Company or oral advice was provided
to the Company that Friedman concluded was an important factor considered by the Company in reaching a decision as to any accounting,
auditing or financial reporting issue; or (ii) any matter that was the subject of a disagreement or reportable event as defined
in Regulation S-K, Item 304(a)(1)(iv) and Item 304(a)(1)(v), respectively.
On December 19, 2012, the Company issued
a press release, which was filed as Exhibit 99.1 in the Original 8-K and incorporated herein by reference, reporting that the Company
has changed its independent registered public accounting firm.