This will be interesting

KPMG Rolls the Dice, Will be the Next Auditor of Overstock.com

Thumbnail image for 200px-KPMG.svg.pngBut you already knew that was going to be the case. Back when we asked you to vote on which firm would be the next firm fired engaged by Overstock, over 42% of you said it would be KPMG.

This news comes despite reservations expressed by at least one reader who, at the time, had this commenlockquote>I for one think it is sad that such a high percentage of survey responders think KPMG will pick up OSTK. I hope from a public opinion and liability standpoint that KPMG will resist the urge to add yet another high risk client to its listing and cause further damage its reputation.

Sorry, dear reader but apparently the high profile cat fight between the company and Grant Thornton wasn’t enough to scare KPMG off. Not even the very public revelation of Patsy’s creepy-ass stalking of Overstock critics in the financial media and blogosphere caused the KPMG partners in SLC to turn this client down.

Oh, and not to mention a management team who thought that filing unreviewed 10-Q was the best course of action. But as white-collar crime expert (and self-proclaimed crook) Sam Antar told us:

KPMG is taking a client with no management integrity and is well advised to study SAS No. 99 about “Consideration of Fraud in a Financial Statement Audit” regarding the unethical “tone at the top” set by Overstock.com’s unprincipled management team. Every single initial financial report for every reporting period issued by Overstock.com has failed to comply with GAAP and other SEC disclosure rules since the company’s inception. Overstock.com has restated its financial reports two times in the last three years and now is trying to avoid a third restatement of financial reports resulting from its improper use of “cookie jar” reserves to inflate its financial performance from Q4 2008 to Q3 2009.

In case you’re not convinced of management’s shadiness, Sam also pointed out that they intended to wait for the current SEC inquiry to be resolved prior to choosing a new auditor:

Patrick Byrne and Jonathan Johnson went back on their promise that they would not shop for an audit opinion. Both Byrne and Johnson previously told investors that Overstock.com would wait until after the SEC Division of Corporation Finance completed its review of the company’s financial disclosures.

We looked at the transcript of the conference call and here’s what we found (a link to the entire transcript is below):

Willis TaylorGagnon Securities – Analyst

Since you’ve dismissed your auditor for a very specific accounting choice, when you go to select a new auditor, how do you prevent yourself from being accused of opinion shopping?

Jonathan JohnsonOverstock.com – President
That’s a great question, Louis, and that’s part of the reason that we’ve decided not to select a new auditor until this — until we resolve this issue with the SEC. We do not want to be accused of opinion shopping. We’d like the SEC to help us figure out — we’d like them to say we’ve done it the right way or we’ve done it the wrong way. Once they say one of those two, we don’t need to opinion shop.

Patrick ByrneOverstock.com – Chairman and CEO
But, so, I would even say to the point that when people have contacted us, we have discouraged any communication on the grounds that we got — for just that reason — well, I have the — no matter who we talk to now, then whoever we ultimately pick, people are going to say, well, you did this because you opinion shop.
So we’re really not having discussions with anybody. It’s nice to get phone calls, but we’re not talking to anybody until we get through this just to prevent — just as a prophylactic measure.

From the sounds of it, Overstock was beating off firms with a stick, so the pressure must have gotten to company’s audit committee to pick a new firm prior to the SEC wrapping up its little inquiry. So can we assume that since the SEC hasn’t told them yay or nay on their accounting, they ARE opinion shopping?

And so the winner (read: next to be dismissed) is KPMG, who not only has to throw together an audit for 2009, they have to re-issue 10-Qs for the last three quarters. Who in SLC is giving up sleep for the next four months?

Here is the Overstock press release (we emphasized some good parts) which is not shy about slamming Grant Thornton or that the SEC isn’t finished with its inquiry:

Overstock.com, Inc. (Nasdaq: OSTK) today announced that its Audit Committee engaged KPMG as the company’s independent registered public accounting firm of record for the fiscal year ending December 31, 2009. KPMG will conduct an integrated audit of the company’s 2009 financial statements, including review of the company’s quarterly information for the periods ending March 31, 2009, June 30, 2009 and September 30, 2009.

It is nice to be back with a Big Four accounting firm,” said Jonathan Johnson, President of Overstock.com. “We are pleased to have the resources and professionalism that KPMG brings as our auditors. We will work closely with them to timely file our 2009 Form 10-K. In the meantime, we remain in discussions with the SEC to answer the staff’s questions on the accounting matters that lead to our filing an unreviewed Form 10-Q for Q3.”

Overstock.com’s Audit Committee dismissed Grant Thornton, its previous auditors, in November when Grant Thornton advised the company that they had revised their position on how the company should have recorded a $785,000 asset in 2008, and, that as a result of this revised accounting position, Grant Thornton would be unable to complete their review of the company’s Q3 2009 financial statements unless the company amended its previous 2009 quarterly filings and restated our 2008 financial results.

We wanted to get KPMG’s thoughts on this but our emails have gone unreturned at this time. If you’re in the know, definitely get in touch with us about anything related to the latest twist to this story.

OSTK_Transcript.pdf

More Deloitte Holiday Cheer This Week (Unofficially)

Big day everyone. Oh, sure there’s that but there are far more important things on the agenda. Namely, Christmaskuh festivities/cafeteria chats at the Stamford, Long Island and two NYC offices. Perfect opportunity to discuss the nominees for most likely to catch an STD on the path to partner.
Elsewhere in the Deloitte stable, the Chicago office is amping up for its rager that is going on this Saturday in Wrigleyville:
Picture 6.png
So by “unofficial” and “informal” we’re sure that’s the “All Clear” for someone to lose their pants and/or shirt by the end of the evening. Plus, we interpret the last line as an open invitation to P. Dubs and KPMG professionals for temporary adoption into the Deloitte family.
That might be the best chance they’ll have at taking in a butchering of “O Come All Ye Faithful” and shameless ass grabbing under the mistletoe, so we suggest they consider it.

Deloitte’s Commitment to Client Service Will be Tested by Dubai World

Thumbnail image for dubai-the-world.jpgLast week we touched on Deloitte and KPMG facing off in the whole Dubai World fiasco. Today we get the lowdown on the possible difficulties that Aidan Birkett — Deloitte’s MD of corporate finance and the Chief Restructuring Offficer of DW — could run into serving his finicky client.
Hard to believe that a group of über-wealthy sheiks (responsible for re-creating the Earth out of tiny man-made islands, no less) would resist outside advice but it sounds like Birkett will have his hands full.


Zawya Dow Jones:

Bankers say his biggest challenge will be getting Dubai’s government to listen. It’s unclear whether he’ll be given a free hand to remodel Dubai World without the interference of the emirate’s political elite.
“When a foreigner comes into the country, ultimately what happens is that the door closes, people speak Arabic, they come out and they say that’s the deal,” said a Dubai-based investment banker, who asked not to be named.

That doesn’t sound complicated. Go to meeting. Listen to your interpreter struggle to keep up. The sheiks nod in agreement at each other. Meeting adjourned.
Naturally, Deloitte is confident that their man will get what he wants:

People who have worked with Birkett in the past say he is a tough operator and will demand that his advice is heeded by Dubai’s powerful sheiks.
“He is robust and he’s absolutely straight, no nonsense,” said Deloitte’s Ward in Dubai. “He doesn’t have to upset everybody along the way but he gets his own way.”

Sounds like a perfect recipe for a boardroom blowup/storm out session to us. DW doesn’t sound like it has a lot of options since all their assets were purchased with debt, so it’ll be interesting to see how they rationalize their “we’ll do whatever the hell we want” attitude. Best of luck, Deloitte.
FOCUS: Deloitte’s Birkett Faces Struggle With Dubai Sheiks [Zawya Dow Jones via WSJ]