On Feb. 2, Mission West revealed that William Croteau of PricewaterhouseCoopers had resigned his post as the company's independent auditor a week earlier without explanation and without issuing a report on the company's 2003 financial statement. "This is one of the most bizarre circumstances I have ever been involved in," said Mission West CEO Carl Berg before announcing the news in a conference call and then assuring listeners that he is "confident our new independent accountant will not propose any material accounting changes."
Along with the conference call, Mission West filed an 8K with the SEC stating that the company's consolidated financial statements for the past two fiscal years "contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles" and that during the past two years "there have been no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure." The filing stated that the company asked PwC to furnish a letter addressed to the SEC stating whether it agrees or disagrees with the statements in its filing within 10 business days. If it did not consent, Berg said legal action was "certainly something that would be considered."
In its response, PwC says it indeed agrees with Mission West's statements, but that there is more to tell. PwC says Mission West declined to provide it written representations of oral representations management made relating to certain related party transactions. "We indicated that the requested written representations were necessary for us to complete our audit (of the company's 2003 financial statements)," says PwC. "The company and its counsel responded that they were not willing to provide the requested written representations and, further, indicated that the requested representations were not necessary for us to complete our audit."
As well, PwC says that in response to its inquiries regarding subsequent events and other matters that may be significant to its audit, "management expressed an unwillingness to respond fully to our inquiries," even after being informed that PwC had discovered new information "that, if further investigated, may materially impact the fairness or reliability of financial statements previously issued."
PwC says that due to its resignation it did not conduct the aforementioned further investigation, instead informing the Mission West audit committee that it was "no longer willing or able to rely on the representations of management." Moreover, it informed the company that its 2001 and 2002 year-end financial statements "should no longer be relied upon" and that it is "no longer willing to be associated with the interim financial statements made through the first three quarters of 2003.
Mission West's story is that Berg believed the representation letter PwC asked Mission West management to sign contained "inaccurate and potentially misleading statements," and that after Mission West provided PwC with alternative language that the company considered factual and correct and the two parties went back and forth on the issue, Croteau wrote an email on Jan. 23 stating that PwC had reached an "impasse" with management on this matter.
Mission West states in its SEC filing that it expected the issue would be resolved by the Audit Committee at the next scheduled meeting on Jan. 27, until Croteau resigned the day before the meeting. Mission West also says that it wasn't until four days after its resignation that PwC made its statement about there being new information that could "materially impact the fairness or reliability of financial statements issued by the company ... ."
Finally, Mission West denies having made any oral representations to PwC that were the same or substantially similar to the representations in PwC's proposed third quarter 2003 representation letter that management rejected. And in what appears to be a preparation for a lawsuit, Mission West concludes its filing by stating that PwC, by refusing to complete the Dec. 31, 2003 audit and failing to allow their audit reports for Dec. 31, 2001 and 2002 to be relied upon, "PwC has acted recklessly, thereby exposing the company to undetermined costs and damages."
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
