Friday, September 29, 2006
CSK Auto Corp. announced that its internal investigation turned up problems with its accounting that triggered the firing to two senior executives and others who worked on the finance side of the company. A press release (here) states:
[T]he Audit Committee of its Board of Directors has substantially completed its previously announced internal investigation (commenced in March 2006), which was conducted with the assistance of independent counsel and a separate accounting firm. The scope of the investigation focused primarily on the Company’s accounting for inventory and vendor allowances associated with the Company’s merchandising programs, but was not limited in any way by the Audit Committee. The investigation identified accounting errors and irregularities that materially and improperly impacted various inventory accounts, vendor allowances, other accrual accounts and related expense accounts.
The Company announced that Martin Fraser (President and Chief Operating Officer), Don Watson (Chief Administrative Officer and former Chief Financial Officer), as well as several other individuals in the Company’s finance organization are no longer employed by the Company. In addition, the Company intends to implement remedial measures expected to include enhanced accounting policies, internal controls and employee training.
Although not identified as a related move, the company also announced that is has begun a search for a new CEO. Current CEO Maynard Jenkins will take over the duties of COO, retiring when the new CEO is appointed. CSK Auto will have to restate its financial for two prior years, and still has not issued audited financials for 2006 yet. If the SEC request for information -- or worse, a subpoena -- has not arrived yet, it will in a few days, so look for the company to disclose that event soon. If the accounting problems are bad enough, a U.S. Attorney's Office may enter the picture, too. (ph)