According to a review of regulatory filings during the month of March, 28 companies disclosed material weaknesses or significant deficiencies in internal controls, or provided updates on the status of their control-improvement processes.
That number is up from 18 similar disclosures in February, and 23 in January. (See box at right for previous months' data).
Not surprisingly, most of the companies making such disclosures had 2003 revenues under $1 billion. Only 20 percent of the companies had revenues above $1 billion, including $5.5 billion Network Associates and $2.3 billion energy production facility developer McDermott International.
Multiple Disclosures
As was the case with prior months' findings, it was common for companies to disclose multiple "types" of weaknesses.
For example, bullet-proof vest maker DHB Industries disclosed personnel issues ("understaffing in the Company's accounting and finance department") as well as accounting policy issues ("failure to disclose certain related party transactions").
Core Molding Technologies claimed to have corrected weaknesses related to accounting policies, as well as segregation of duties for certain personnel.
That was also the case for the larger companies on the list. $1.7 billion diversified industrial company Sequa Corp. cited personnel-related deficiencies related to the lack of qualified accounting personnel, as well as numerous accounting issues including "timely accounting reconciliations."
Accounting Policies And Personnel Issues
The largest category of disclosures, constituting 40 percent of all weaknesses and deficiencies, was related to problems with accounting policies, systems and procedures. The issue most often cited in this category was insufficient documentation of policies. Transaction-approval and account-reconciliation problems were also common.
The second most frequently mentioned problem, noted in 37 percent of the disclosures, was related to personnel issues. Last month, these personnel-related issues were at the top of the list. Among the most common personnel issues was staffing limitations, inadequate training, and poor segregation of duties.
Revenue recognition problems were also common, especially among the larger companies disclosing weaknesses or deficiencies; over half the companies citing such problems had revenue exceeding $1 billion.
Interestingly, only one company specifically cited an IT-related weakness, noting a "lack of information technology controls to minimize the risk of data manipulation."
For the record, most disclosures were very clear and in plain English. $3.2 billion Marconi was the only company to offer a frustratingly vague disclosure. "External legal and accounting advisors carried out extensive due diligence on internal controls and risk management," noted the telecommunications equipment company, "following which plans to address identified weaknesses were actioned by Group management." No details on the weaknesses were available or previously disclosed, and Marconi did not return calls before Compliance Week's deadline.
Inclusions
Included in the March list are companies that actually reported adequate controls, but simultaneously disclosed related problems. For example, Vancouver-based Lions Gate Entertainment, which produces and distributes independent films, disclosed a variety of issues that may have resulted in "material adjustments recorded by management" that their auditor identified, even though the company believes that "internal controls over systems were adequate."
Also included are companies providing significant updates on the status of previously disclosed internal control issues.
As was the case in prior months, we've also included companies that are the subject of class action lawsuits alleging internal control weaknesses or deficiencies. Such is the case with Levis, Sonus Networks, i2 Technologies and MicroTune, below. Based on recent interviews with litigation experts, the potential for controls-related litigation is high, and we wanted to make sure subscribers were aware of the most recent cases. The last time controls-specific litigation was noted in this column was at NCI Building Systems in January.
Exclusions
We did not include companies that did not provide significant updates on their internal control improvement process. Worldcom and $4.3 billion HealthSouth, for example, provided an update on investigations at their respective companies, but simpy noted that controls are still inadequate and may contribute to additional risks if not repaired quickly. CMS Energy, on the other hand, specifically mentioned improved controls, noting that the company "monitored the operation of the improved internal controls throughout 2003 and have concluded that they were effective."
In addition, we've tried to eliminate duplicative mentions of the same item within the same month, even when minor updates were provided. $117.5 million MarkWest Energy Partners, for example, disclosed a material weakness on Mar. 15, and then provided a brief update one week later when the firm announced it had dismissed PricewaterhouseCoopers. We've only provided information below on the initial, more detailed filing.
The List
The complete list of companies disclosing or updating weaknesses or deficiencies in their internal controls during the month of March, including excerpts highlighted in red, is below. Please keep in mind that—due to limited space—we have not included the complete text in most cases. To those ends, we have provided the actual filing (courtesy 10K Wizard) so you can review complete wording if interested.
As usual, our goal is to help companies understand how their peers are disclosing information in the post-SOX era, where few comparables exist, and where many of the disclosures are new and uncharted.
Company
Date
Description
Gexa Corp.
Retail electricity provider. ('02 Sales: $19.0m)
Mar. 31
MATERIAL WEAKNESS IDENTIFIED
—
In connection with the completion of the audit for fiscal year 2003, the Company's independent auditors, Hein & Associates, LLP ("Hein"), identified certain material weaknesses in the Company's systems of internal controls that Hein considers to be reportable conditions under standards established by the American Institute of Certified Public Accountants. The identified deficiencies generally relate to (i) adequacy of the training of the staff within the Company's accounting department, and (ii) quality control over the financial reporting process. Hein has also indicated that the Company's method for calculating its revenues requires additional review and testing.
PowerLinx Inc.
Powerline communications products. ('03 Sales: $1.4m)
Mar. 30
WEAKNESS IDENTIFIED, BELIEVED CORRECTED
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On April 30, 2001, Carol McAtee, CPA sent a letter to the Audit Committee and our management stating that certain deficiencies existed with the internal control design of Powerlinx, which in the opinion of Carol McAtee, CPA could affect our ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. As a result of these internal control deficiencies, several audit adjustments were proposed and recorded to our financial statements for the fiscal year ended December 31, 2000. Our Audit Committee and Board of Directors discussed the matter with Carol McAtee, CPA, and we have authorized Carol McAtee, CPA to respond fully to any inquiries of Aidman Piser & Company P.A. concerning the matter. There was no disagreement regarding the foregoing, and we believe we have remedied the internal control deficiencies.
Core Molding Technologies Inc.
Produces plastic molded products. ('03 Sales: $92.8m)
Mar. 30
MATERIAL WEAKNESS IDENTIFIED
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The investigation, which began immediately after the inventory misstatements were discovered, confirmed that a concealment of inventory shortages from 2002 through the third quarter 2003 existed and was limited to the actions of a former employee at the Gaffney production facility. Management reported, and the Audit Committee agreed that material weaknesses in internal controls related to the completeness of accounting policies and procedures and the segregation of duties for certain personnel with respect to inventory reporting existed at the Gaffney facility. The analysis also confirmed that the inventory misstatements masked material and labor inefficiencies within the plant and that inventory misstatements did not affect any customer deliveries. The Company has taken all appropriate measures to correct these material weaknesses including:
o Personnel changes at the Gaffney facility.
o Increased monthly inventory analysis and reconciliation.
o Continued emphasis ... overriding of internal controls will not be tolerated; and
o The establishment of a whistle blower hotline.
Lions Gate Entertainment Corp.
Independent film producer. ('03 Sales: $301.8m)
Mar. 29
WEAKNESS IDENTIFIED; AUDITORS DISMISSED
—
A number of material adjustments recorded by management were identified by the auditors during the audit. The auditors advised that while internal controls over systems were adequate, lack of timely monitoring controls over systems output and accounting entries, such as reconciliations of account balances, analysis and review of transactions, balances and adjustments, may have contributed to the number of adjustments. The auditors advised that they were not able to determine whether the matters raised were related solely to significant events that occurred during the year ended March 31, 2001 as the auditors were dismissed upon completion of the audit for the year ended March 31, 2001.
Southwest Water Co.
Water facilities operator. ('03 Sales: $173.0m)
Mar. 26
MATERIAL WEAKNESS IDENTIFIED
—
In March 2004, management, in consultation with the Company's independent accountants, identified deficiencies in certain aspects of the monitoring and analysis components of the internal control procedures in our Services Group segment, which constitute a reportable condition (as defined in AU 325, Communication of Internal Control Related Matters Noted in An Audit of the AICPA Professional Standards). The identified deficiencies did not require any restatement of the Company's consolidated financial statements for any prior period. Management is taking specific steps to address these deficiencies, and we estimate that it will take approximately six to nine months to fully rectify these deficiencies.
DT Industries Inc.
Automated assembly, testing solutions. ('03 Sales: $241.1m)
Mar. 24
MATERIAL WEAKNESS IDENTIFIED
—
... in connection with its audit for the fiscal year ended June 30, 2002, PwC informed the Company that "material weaknesses" (as that term is defined by the AICPA) in internal controls were identified at the Company's Erie, Pennsylvania operations. The weaknesses identified by PwC were primarily in the location's contract accounting processes, including not using actual operating data for certain projects to recognize revenues and costs in the financial statements, the lack of supporting documentation for reconciling items contained in account reconciliations and manufacturing variances not being appropriately captured, analyzed or recorded in the financial statements. PwC also identified that the control environment was weakened by the Erie controller also functioning as the general manager, and by staffing limitations at the corporate level, which hampered the effectiveness of corporate oversight. As a result of the above and as previously reported in its SEC filings, during fiscal 2002, the Company restated its previously reported audited consolidated financial results for fiscal 2001, 2000 and 1999, as well as its unaudited consolidated financial results for the first three quarters of fiscal 2002. The Company took actions to address these control deficiencies at its Erie operation, which was subsequently closed during fiscal 2003. In connection with their audit for the year ended June 30, 2003, PwC informed the Company that a "reportable condition" (as that term is defined by the AICPA) existed with respect to the accounting for the UK pension plan. The reportable condition resulted from the Company not using data or a curtailment loss contained in an actuarial report to record annual pension costs in the Company's audited consolidated financial statements for fiscal 2002.
MarkWest Energy Partners
Processor, transporter of natural gas. ('03 Sales: $117.5m)
Mar. 15
MATERIAL WEAKNESS IDENTIFIED
—
... PwC identified to management and the Audit Committee certain deficiencies in our internal
accounting controls which, considered collectively, may constitute a material weakness in our internal controls pursuant to standards
established by the American Institute of Certified Public Accountants. Deficiencies identified by PwC included a possible insufficiency in the personnel resources available to adequately maintain our financial reporting obligations as a public company; inadequate implementation of uniform controls over certain acquired entities and operations; inadequate control over classification of certain fixed asset balances and processes for accrual of certain accounts payable; and the potential need for separation of certain duties between payroll and other accounting personnel. PwC concluded that these deficiencies required PwC to increase the scope of its audit procedures in order to issue its unqualified report on our financial statements ...
First Consulting Group Inc.
IT services and software for health care industry. ('03 Sales: $287.7m)
Mar. 18
NO MATERIAL WEAKNESS, BUT SIGNIFICANT DEFICIENCY IDENTIFIED
—
As part of our year end audit reviews, we identified no material weaknesses in internal controls, but did identify one item that is considered a significant deficiency in internal controls.
Item: Lack of a control log and routine monitoring of the log for access to our systems.
Comment: We have implemented necessary controls to remediate any potential for a significant deficiency on a continuing basis. We believe the potential deficiency has not adversely affected, and is not reasonably likely to adversely affect, our ability to record, process, summarize and report financial information.
I2 Technologies Inc.
Supply chain management software. ('03 Sales: $494.9m)
Mar. 17
INTERNAL CONTROLS WEAKNESS IN CLASS-ACTION LAWSUIT
—
Beginning in April 2003, additional purported class action complaints were filed in the United States District Court for the Northern District of Texas (Dallas Division) against the company and certain of our current and former officers and directors. The complaints brought claims under the federal securities laws, specifically Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, relating to our announcement that we would re-audit certain of our consolidated financial statements and that there would be material adjustments to our financial statements. Specifically, these actions allege that we issued a series of false or misleading statements to the market during the class period that failed to disclose that (i) we had materially overstated our revenue by improperly recognizing revenue on certain customer contracts, (ii) we lacked adequate internal controls and were therefore unable to ascertain our true financial condition, and (iii) as a result of the foregoing, our financial statements issued during the class period were materially false and misleading. Plaintiffs contend that such statements caused our stock price to be artificially inflated. The complaints seek unspecified damages on behalf of a purported class of purchasers of our common stock during the period from April 18, 2000 to January 24, 2003.
HiEnergy Technologies Inc.
Explosive detection and imaging technology. ('03 Sales: $0.1m)
Mar. 17
PAST WEAKNESS BELIEVED CORRECTED, BUT LISTED AS RISK FACTOR
—
... We previously had a general weakness in recording equity transactions involving the grants of options and warrants which caused us to record these transactions at a later date than incurred, although this weakness did not result in any improper reporting on our financial statements. During the year ended April 30, 2003 we implemented additional internal controls to address this weakness. We now have a full time person responsible for the control of agreements involving equity. Our Chairman and CEO and Board of Directors must approve all agreements regarding the sale of equity and the issuance of warrants and stock options. The Company has a very small finance and accounting staff and due to the limited resources of the Company and the small accounting staff, it is not always possible to have optimum segregation of accounting and finance duties. However, we believe that our current system of segregation of duties which affect control over cash, acquisition and disposal of assets and equity transactions are generally adequate and do not have any negative impact on our financial reporting system.
I Sector Corp.
IT hardware, software and services. ('03 Sales: $62.2m)
Mar. 17
MATERIAL WEAKNESS IDENTIFIED
—
Grant Thornton LLP ("Grant Thornton"), our independent accountants, has identified and reported to the audit committee of our board of directors certain internal control deficiencies that Grant Thornton considers to be significant deficiencies under the standards established by the American Institute of Certified Public Accountants and the SEC. The identified internal control deficiencies relate to:
- a material weakness involving contemporaneous documentation of all terms related to revenue transactions and conclusions regarding customer creditworthiness; and
- a significant deficiency with respect to the review of significant agreements by our accounting personnel in order to monitor compliance with their terms.
We have initiated corrective actions to address these internal control deficiencies, by implementing the following measures:
- established improved procedures for the review of revenue recognition policies and contract management policies and procedures;
- held formalized training of finance and sales staff; and
- hired an additional person in our accounting department.
DHB Industries Inc.
Manufactures bullet-proof vests and flak jackets. ('03 Sales: $230.0m)
Mar. 16
MATERIAL WEAKNESS IDENTIFIED; AUDITOR RESIGNED
—
... Grant Thornton ... identified certain deficiencies involving internal control it considered to be significant deficiencies that, in the aggregate, constituted material weaknesses under standards established by the American Institute of Certified Public Accountants. These deficiencies included the failure to disclose certain related party transactions in the Company's Form 10-K for the fiscal year ended December 31, 2002, the Company's reliance on substantial outside assistance from outside professionals in preparing the Company's financial statements, and understaffing in the Company's accounting and finance department ... Grant Thornton formally notified the Company of these deficiencies on the date of their resignation.
MicroTune Inc.
Manufactures radio frequency solutions. ('03 Sales: $46.2m)
Mar. 15
INTERNAL CONTROLS WEAKNESS IN CLASS-ACTION LAWSUIT
—
... At this time, the alleged misrepresentations and omissions include, among others, allegations that: Microtune materially overstated revenue by recognizing certain sales immediately as revenue when deferred revenue recognition would have been more appropriate; Microtune failed to establish reserves when appropriate; Microtune lacked adequate internal controls to assure its financial statements were fairly presented in conformity with generally accepted accounting principles; Microtune lacked sufficient controls and procedures for the timely and accurate issuance of periodic press releases; Microtune lacked sufficient means to monitor prior public statements to detect whether an update was required; and Microtune failed to record impairment charges relating to the assets acquired with the Transilica acquisition at the appropriate time.
Sonus Networks Inc.
Provider of voice infrastructure products. ('03 Sales: $62.6m)
Mar. 15
CLASS ACTION ALLEGES MATERIAL WEAKNESS
—
... Specifically, these actions allege that we issued a series of false or misleading statements to the market during the class period that failed to disclose that (i) we had materially overstated our revenue by improperly recognizing revenue on certain customer contracts; (ii) we lacked adequate internal controls and were therefore unable to ascertain our true financial condition; and (iii) as a result of the foregoing, our financial statements issued during the class period were materially false and misleading. Plaintiffs contend that such statements caused our stock price to be artificially inflated ...
Sequa Corp.
Diversified industrial company. ('03 Sales: $1.7b)
Mar. 15
CONTROL DEFICIENCIES IDENTIFIED
—
... However, management, in consultation with Ernst & Young LLP (E&Y), Sequa's independent auditors, has identified and reported to the audit committee of the board of directors, certain matters involving internal control deficiencies considered to be reportable conditions under standards established by the American Institute of Certified Public Accountants. E&Y and management have reported to the audit committee that none of the reportable conditions is believed to be a material weakness. The reportable conditions, within certain segments, include conditions surrounding the following: inventory valuation; timely accounting reconciliations; the use of alternative methods to record fixed assets and depreciation instead of the corporate fixed asset management system; lack of qualified accounting personnel at several locations due to turnover; and the lack of segregation of duties at one location. Management is actively working to correct the internal control deficiencies identified and such efforts include: instituting new controls; enforcing existing policies and providing oversight with respect to inventory valuation procedures; and timely accounting reconciliations, requiring the disciplined use of a fixed asset management system; actively interviewing candidates with the intention of expeditiously filling such vacancies; and transferring certain responsibilities to an operating headquarters level to alleviate the lack of segregation of duties.
McDermott International Inc.
Oil and gas production facilities. ('03 Sales: $2.3b)
Mar. 15
MATERIAL WEAKNESS IDENTIFIED, LISTED AS RISK FACTOR
—
As described in Item 9A, we have identified certain matters involving internal controls and operations of our Marine Construction Services segment which, among other things, impact our ability to forecast accurately total costs to complete fixed-price contracts, primarily first-of-a-kind projects, until we have performed all major phases of the work. In addition, our auditors have advised us that these matters are considered a "material weakness" in JRM's ability to accurately estimate costs to complete first-of-a-kind projects. A material weakness is a significant deficiency in a significant control or an aggregation of such deficiencies that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected ...
New Horizons Worldwide Inc.
Operates computer training centers. ('03 Sales: $139.2m)
Mar. 15
MATERIAL WEAKNESS IDENTIFIED
—
... In connection with their audit of the Company's financial statements as of and for the year ending December 31, 2002, D&T identified certain deficiencies in the Company's internal control procedures that D&T considered to be a material weakness. In March 2003, D&T advised the Audit Committee that it had identified certain deficiencies in the Company's ability to timely and accurately produce data that supports its revenue recognition rates for certain of its learning programs. These matters were discussed with D&T and the Audit Committee of the Company's Board of Directors, as well as Grant Thornton LLP, the Company's new independent auditors. To address the material weakness, the Company has devoted additional resources and made certain additional procedural changes.
Manitowoc Co. Inc.
Diverse manufacturer in marine, foodservice industries. ('03 Sales: $1.6b)
Mar. 12
INTERNAL CONTROL "ISSUES" IDENTIFIED
—
The company is currently undergoing a comprehensive effort to ensure compliance with Section 404 of the Sarbanes Ocly Act of 2002 for the year ended December 31, 2004. This effort includes internal control documentation and review under the direction of senior management. During the course of these activities, the company has identified certain internal control issues which management believes need to be improved. These control issues are, in large part, the result of the company's increased size and complexity due to recent acquisitions. The review has not identified any material weakness in internal control as defined by the Public Company Accounting and Oversight Board. However, the company has made improvements to its internal controls over financial reporting as a result of its review efforts and will continue to do so. These improvements include formalization of policies and procedures, change to employee access to computer systems, improved segregation of duties, and additional monitoring controls.
Roanoke Electric Steel Corp.
Manufacturer of merchant steel products. ('03 Sales: $312.1m)
Mar. 12
REPORTABLE CONDITION, BUT NO MATERIAL WEAKNESS
—
During the first quarter, Deloitte & Touche informed the Registrant that they had identified a reportable condition in the design of the Registrant's internal controls. The condition, which was not a material weakness, related to a lack of segregation of duties between certain transaction recording functions and related asset accountability functions. Since being informed of this condition, the Registrant has taken various steps, including designing and instituting additional procedures, hiring additional staff, and separating and reorganizing functional responsibilities ...
CMS Energy Corp.Energy holding company. ('03 Sales: $5.5b)
Mar. 12
CONTROL IMPROVEMENTS AND CHANGES
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In late 2001 and during 2002, we identified a number of deficiencies in CMS MST's systems of internal accounting controls. The internal control deficiencies related to, among other things, a lack of account reconciliations, unidentified differences between subsidiary ledgers and the general ledger, and procedures and processes surrounding our accounting for energy trading contracts, including mark-to-market accounting ...
... We believe that the improvements to our system of internal accounting controls were appropriate and responsive to the internal control deficiencies that were identified. We monitored the operation of the improved internal controls throughout 2003 and have concluded that they were effective.
Network Associates Inc.
Security software. ('03 Sales: $936.3m)
Mar. 11
MATERIAL WEAKNESS IDENTIFIED
—
... In evaluating these corrections, PWC determined and reported to our audit committee that the underlying control issues should be considered a material weakness under standards established by the Public Company Accounting Oversight Board and the Registrant should institute additional related control procedures. The Registrant's audit committee has discussed the foregoing with PWC, and the Registrant has bolstered internal controls around the recognition of international revenues as part of its quarterly financial closing process and the manual journal entry process. The Registrant is also in the process of initiating additional internal control procedures to address the identified weaknesses, including the hiring of additional personnel, determining how to automate revenue recognition calculations so as to limit the number of manual adjustments, and engaging in additional testing of its control processes and procedures.
I-Many Inc.
Contract management software. ('03 Sales: $39.4m)
Mar. 11
MATERIAL WEAKNESS IDENTIFIED
—
Deloitte advised the Company's Audit Committee on January 29, 2004, in connection with the December 31, 2003 audit, that (1) there were two disagreements on matters of accounting principles and practices during the Company's two most recent fiscal years ... and (2) Deloitte has identified a deficiency in the Company's internal control that Deloitte considers to be a "material weakness" under standards established by the American Institute of Certified Public Accountants. Deloitte discussed each of these matters with the Company's Audit Committee and management ...
Because of the adjustments to revenue ... and other issues relating to the Company’s revenue contracts, which have all been resolved to Deloitte’s satisfaction, Deloitte concluded that a material weakness exists in the Company’s system of internal control as it
relates to revenue recognition and contracting practice.
Cellstar Corp.
Global wholesaler of cellular phones. ('03 Sales: $1.8b)
Mar. 10
WEAKNESS IDENTIFIED IN MEXICO SUBSIDIARY
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... KPMG issued a management letter in connection with its audit of the Company's financial statements for the fiscal year ended November 30, 2001, which identified "material weaknesses" (as defined under standards established by the American Institute of Certified Public Accountants) in the Company's Mexico operations. These material weaknesses were insufficient documentation of accounting entries and procedures, failure to timely reconcile accounts receivable and accounts payable, inaccurate inventory aging, and lack of information technology controls to minimize the risk of data manipulation. Although there were no material weaknesses in the Company's internal controls on a consolidated basis for the fiscal year ended November 30, 2002, KPMG, in connection with its audit of the Company's consolidated financial statements for the fiscal year ended November 30, 2002, identified a material weakness at the Company's Mexico subsidiary level that related to the reconciliation of certain manual accounting systems in Mexico.
Marconi Corp PLC
Telecommunications equipment. ('03 Sales: $3.2b)
Mar. 10
RISK FACTORS
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During fiscal 2003, there has been a particular risk that the Company would fail to renegotiate a satisfactory financial restructuring agreement with creditors. The Board met 48 times in fiscal 2003 to review the status of the negotiations and to ensure that an agreement was reached with the Group's financial creditors. External legal and accounting advisors carried out extensive due diligence on internal controls and risk management, following which plans to address identified weaknesses were actioned by Group management. In addition, the Directors have formally re-evaluated the risks disclosed in the document posted to creditors in connection with the Company's scheme of arrangement and in the Company's prospectus as part of the financial restructuring process.
UniMark Group Inc.
Processes Mexican fruits for U.S. distribution. ('03 Sales: $27.2m)
Mar. 8
DEFICIENCY IDENTIFIED, BUT NOT CONSIDERED MATERIAL WEAKNESS
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... In connection with the preparation of this quarterly report on Form 10-Q, our management identified certain deficiencies in the company's internal control procedures, none of which would be deemed to be a material weakness under standards established by the American Institute of Certified Public Accountants. These internal control deficiencies, which were investigated by our Audit Committee and independent accountants, did not result in a material misstatement of our condensed consolidated financial statements. Management and our Audit Committee have adopted corrective measures, and will be adopting others, to address and eliminate these deficiencies, which should improve our internal and disclosure controls. These measures include the hiring of an external accounting firm to assist in the preparation of timely monthly, quarterly and annual financial statements in accordance with U.S. GAAP and improved controls relating to the payment of certain expenses at one of our Mexican subsidiaries and a closer monitoring of the company's financial results by its Audit Committee.
Topaz Group Inc.
Miner of semi-precious stones. ('02 Sales: $22.9m)
Mar. 3
WEAKNESS IDENTIFIED; AUDITOR RESIGNS
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On February 4, 2004, Grant Thornton LLP (GT) resigned as the independent accountants for the Company. The Company has not yet engaged a new independent accountant. … In connection with their audit of the Company's financial statements as of and for the year ended December 31, 2002, Grant Thornton LLP ("GT") advised the Company that it had identified certain deficiencies in the Company's internal control procedures that GT considered to be a "material weakness" under standards established by the American Institute of Certified Public Accountants. GT advised the Audit Committee on March 10, 2003, that it identified certain deficiencies in the Company's ability to timely and accurately close our books as well as of our subsidiaries resulting in our inability to timely file our annual report for the period ended December 31, 2002. Additionally, we were unable to accurately record our inventory in accordance with accounting principles generally accepted in the United States of America and we were unable to prepare our financial statements without outside assistance ...
Levi Strauss & Co.
Maker of jeans and sportswear. ('03 Sales: $4.1b)
Mar, 1
CLASS ACTION ALLEGES FAILURE TO DISCLOSE MATERIAL WEAKNESS
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... Specifically, the action alleges that certain of our financial statements and other public statements during this period materially overstated our net income and other financial results and were otherwise false and misleading, and that our public disclosures omitted to state that we lacked adequate internal controls such that we were unable to ascertain our true financial condition. Plaintiffs contend that such statements and omissions caused the trading price of our bonds to be artificially inflated. Plaintiffs seek compensatory damages as well as other relief.
Hooker Furniture Corp.Residential and commercial furniture. ('03 Sales: $309.0m)
Mar. 1
MATERIAL WEAKNESS IDENTIFIED
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The Company's management and KPMG LLP ("KPMG"), the Company's independent auditors, advised the Company's Audit Committee that during the course of the fiscal 2003 audit, material weaknesses in internal controls were noted relating to lack of documented second review and approval of certain recorded transactions for financial reporting purposes and segregation of duties and formal documentation process for lumber purchasing.
Management and KPMG LLP also advised the Audit Committee of significant deficiencies with respect to certain other matters, principally relating to documentation of processes and responsibilities. In some cases, the identified weaknesses or deficiencies could also constitute deficiencies in the Company's disclosure controls and procedures.
Sales numbers courtesy Hoovers.com
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