Justice Department Probing Electric-truck startup Lordstown Motors Corp. (NASDAQ: RIDE)

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Lordstown Motors
KPMG is attached to this lawsuit. The audit firm failed to report Lordstown’s misleading the shareholders on questionable pre-order demand for the Endurance electric pickup truck. Production of the Endurance truck was way behind schedule, and Lordstown required cash infusion. KPMG should have issued a modified audit report on FY 2020 financial statements.
The lawsuit would affect KPMG’s 2021 audit since the 2021 audited reports would need to indicate there was the detection of errors from the previous period, which would influence financial restatement. However, failure to identify the errors would indicate that KPMG had also provided a misleading audit report in 2020. The auditor provides reasonable assurance that financial statements are free from material misstatements because of error or fraud. KPMG would have modified its opinion about the 2020 audit report and indicated this in the 2021 audit report.
Lordstown is expected to begin production of the endurance by September 2021. The production schedule was pushed to the first quarter of 2022, with Lordstown reporting there were delays in accessing most of the car parts (Foldy). The new production schedule would influence a change in opinion with the auditor either issuing an adverse opinion if the statements fail to reflect the accurate financial position or issuing a qualified opinion. There is inadequate disclosure on production and pre-orders.
Lordstown’s 2020/2021 issues:
Audit Opinion – KPMG issued an unqualified opinion in 2020 but would provide a qualified audit opinion if there were inadequate disclosures.Going Concern – The au...