ITEM 4.01
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CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT.
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(a) On
December 19, 2012, the Company’s Audit Committee of the Board of Directors approved the dismissal of PwC as the Company’s
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 audit 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 a disagreement between the Company and PwC, which was resolved by the Company seeking guidance from the Office of Chief
Accountant of the 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 advised by PwC of certain
events reportable in accordance with Item 304(a)(1)(v) of Regulation S-K in PwC’s letter dated January 4, 2013 (“PwC’s
Letter”). 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 subject matter with PwC. The Company 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. The Company’s Audit Committee discussed
such subject matter with PwC. The Company has authorized PwC to respond fully to any inquiries of the Company’s successor
independent registered public accounting firm concerning the reportable events.
Paragraph B of PwC’s Letter states
that it had previously advised the Company of the need to expand the 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. Paragraph B of PwC’s
Letter also states that as a result of PwC’s dismissal, its audit work, including the above-mentioned expanded procedures,
had not been completed.
The Company disagrees with paragraph B of the PwC’s Letter because it
states that it had advised the Company of the need for expanded audit procedures. In fact, PwC only advised the Company of one
expanded audit procedure in each of the two categories, the Company's assessment of its ability to continue as a going concern
and the Company’s impairment analysis for long-lived assets. That one expanded audit procedure was for the Company itself
to provide additional information to PwC through a detailed assessment.
The Company did perform its own analysis
and detailed assessment and concluded that it is operating as a viable business and no issue exists regarding the Company’s
impairment analysis of long-lived assets. The Audit Committee discussed both these issues with PwC. The Company has 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 Amendment No. 2. The Company requested that PwC furnish the Company with a letter addressed
to the Commission stating whether or not PwC agrees with the Company’s statements included in this Item 4.01 as set forth
in Amendment No. 2.
A copy of this letter, which the Company received on January 30, 2013, is filed as Exhibit 16 hereto.
PwC’s Letter states in paragraphs
A and B there are reportable events. The Company does not believe that any of those matters will prevent the Company’s current
independent registered public accounting firm from completing 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 Commission and the New York Stock Exchange of these expected
filing dates.
(b) On
December 19, 2012, the Company’s Audit Committee 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
changed its independent registered public accounting firm.