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Why CannTrust Is Down 5% Again Today

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CannTrust Holdings Inc (TSX:TRST)(NYSE:CTST) issued a press release on Friday stating that its auditors have pulled their most recent reports. The audit report included in the annual filings, which was dated March 27, 2019, as well as the interim report dated May 13, 2019, which was for the most recent quarterly results, were both pulled by audit firm KPMG.

KPMG is pulling them for two reasons. The first is that CannTrust itself said the financials can’t be relied upon since the punishment that Health Canada decides to impose on the company could have an adverse impact on its financials. By doing so, it clearly undermined the audit reports and probably left KPMG feeling it had no other choice, especially since its reports at that time were likely based on incomplete information. Another reason for its decision was “the recent sharing with KPMG of newly uncovered information from the Special Committee’s investigation.” Although we don’t yet know what this information is, we know that led to the company’s change in leadership.

Why should investors care about an audit report?

Think of an audit report is a stamp of approval. Without it, investors wouldn’t want to rely on a company’s financials. While it normally doesn’t include anything exciting, the absence of it means that the financials haven’t been properly vetted and that investors don’t know for sure how accurate the numbers are. Auditors go through the details to make sure that not only are the calculations correct but that processes and controls are in place to ensure they are accurate.

Disclosure: The author of this article does not hold any shares of the stock(s) mentioned in this article. This article is not a substitute for financial advice and this is not intended to persuade investors to buy or sell the stock(s) mentioned. Investors are recommended to seek professional investment advice or do their own analysis before making a stock purchase.