CannTrust’s auditor no longer endorses 2018 financial statement amid controversy

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CannTrust Holdings Inc. says its independent outside auditor has withdrawn its endorsement of the 2018 financial statements, the latest fallout from recent revelations about illicit grow rooms at the Ontario-based cannabis company. The root system from a cannabis cutting is photographed at the CannTrust Niagara Greenhouse Facility during the grand opening event in Fenwick, Ont., on Tuesday, June 26, 2018. THE CANADIAN PRESS/ Tijana Martin

VAUGHAN, Ont. — CannTrust Holdings Inc.’s independent outside auditor has withdrawn its endorsement of the company’s 2018 financial statements, the latest fallout from recent revelations about illicit grow rooms at the Ontario-based cannabis producer.

Accounting firm KPMG LLP has withdrawn its March 27 report on 2018 financial results and an interim report for the three months ended Mar. 31, 2019 and declared that the audited results can’t be relied upon as accurate, the marijuana grower said Friday in statement from Vaughan, Ont. .

The move is the latest in a string of woes for the beleagured Toronto-area company after it revealed a Health Canada probe found the company had grown cannabis in several rooms at its Pelham, Ont., facility in Niagara Region without government approval, and that employees had provided inaccurate information to regulators.

The Ontario Securities Commission said last week it has launched a joint investigation with the RCMP to examine unlicensed growing at CannTrust’s greenhouse.

That followed an annoucement from the company’s board of directors that it had fired its CEO and asked its chairman to resign after the board discovered new information during an internal investigation.

The board appointed the special committee’s chair Robert Marcovitch as interim CEO in the wake of the departures.

CannTrust said Friday said the auditor’s decision to revoke its reports was prompted by the company’s caution against relying on financial statements for those time frames, as well as the recent sharing with KPMG “of newly uncovered information from the special committee’s investigation, including information that led to senior leadership changes.”

CannTrust added that KPMG was not aware of the information recently shared by the company when the auditor issued its reports and that it had relied upon representations made by individuals no longer at the company.

The company said it will co-operate with KPMG, which remains CannTrust’s outside auditor, as well as authorities investigating the matter.

“We will continue co-operating with our auditor and regulators, and take whatever steps are necessary to restore full trust in the company’s regulatory compliance. Our medical patients, customers, shareholders and employees deserve nothing less”, Marcovitch said in a statement Friday.

CannTrust’s shares were down 7.4 per cent to $2.77 per share Friday morning on the Toronto Stock Exchange. Its stock has fallen more than 50 per cent on the Toronto market since the scandal broke.

The company has warned that it would likely miss its filing deadline for an interim financial report because of the significant uncertainty on the impact of the pending Health Canada decisions.

Health Canada’s probe could result in the suspension or termination of CannTrust’s cannabis licences and fines up to $1 million.

The Vaughan, Ont.-based company, which has halted all sales and shipments as Health Canada continues its probe, said previously that it had hired a financial adviser to help it explore a potential sale and other strategic alternatives.

CannTrust has disclosed that the production in five unlicensed rooms took place between October 2018 and March 2019, before it received licences for those rooms in April 2019.

 

 

 

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The Canadian Press


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