|SEVEN STARS CLOUD GROUP, INC. filed this Form DEF 14A on 11/20/2017|
PROPOSAL NO. 2:
RATIFICATION OF APPOINTMENT
KPMG Huazhen LLP (“KPMG”) was our independent registered public accounting firm for the year ended December 31, 2016 On April 27, 2017, that firm was dismissed. The dismissal of KPMG was approved by our Audit Committee. Our Board has appointed Grant Thornton, LLP (“Grant Thornton”) as our independent registered public accounting for the fiscal year ending December 31, 2017, and recommends that shareholders vote for ratification of this appointment.
During the two fiscal years ended December 31, 2016, and in the subsequent interim period through April 27, 2017, there were no: (1) disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement, or (2) reportable events, except that KPMG advised the Company of a material weakness in the Company’s internal control of financial reporting related to the design, documentation and implementation of effective internal controls over the review of the cash flow forecasts used in assessing the recoverability of licensed content.
The audit reports of KPMG on the consolidated financial statements of the Company and subsidiaries and variable interest entities as of and for the years ended December 31, 2016 and 2015 did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles, except as follows:
KPMG’s report of the consolidated financial statements as of and for the years ended December 31, 2016 and 2015, contained a separate paragraph stating “the Company incurred recurring losses from operations, has net current liabilities and an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.”
On April 27, 2017, the Company appointed Grant Thornton, China member firm of Grant Thornton International as its new independent registered public accounting firm to audit the Company’s financial statements for the year ending December 31, 2017. The decision to retain Grant Thornton was approved by the Audit Committee.
During the Company's fiscal years ended December 31, 2016 and 2015 and the subsequent interim period through April 27, 2017, neither the Company nor anyone on its behalf has consulted with GT regarding (i) the application of accounting principles to a specific transaction, either completed or proposed or (ii) the type of audit opinion that might be rendered on the Company's financial statements and, neither a written report nor oral advice was provided to the Company that Grant Thornton concluded was an important factor considered by the Company in reaching a decision as to accounting, auditing or financial reporting issues, or (iii) any matter that was the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions), or (iv) any “reportable event” (as described in Item 304(a)(1)(v) of Regulation S-K).
Shareholder ratification of the appointment of Grant Thornton as our independent registered public accounting firm is not required by our Bylaws or otherwise; however, our Board is submitting the appointment of Grant Thornton to our shareholders for ratification as a matter of good corporate practice. If our shareholders fail to ratify the appointment, our Audit Committee and our Board will reconsider whether or not to retain Grant Thornton. Even if the appointment is ratified, our Board in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of us and our shareholders.
A representative of Grant Thornton is expected to attend the Annual Meeting with the opportunity to make a statement and/or respond to appropriate questions from shareholders present at the meeting.