Auditors Not Investigating

Faced with growing questions why a revenue-recognition problem has prompted yet another restatement, Nortel said yesterday its internal and external auditors are not conducting an investigation into the matter. Nortel said the auditors are performing a review related to “internal control deficiencies” and not investigating improper conduct. However Nortel defines “internal control deficiencies”, it doesn’t sound like confidence-building news. And the that an auditor has to be called in at this point is a major setback because it suggests all the work done to clean the books wasn’t done properly. I mean, revenue recognition was one of the key issues that led to the accounting scandal – allegedly caused by senior executives cooking the books to trigger a bonus program. If there was one problem that was not going to come back and haunt Nortel, it was revenue recognition – at least that is what most people assumed. Either Nortel is being super-careful to avoid another major scandal or someone’s not doing their job well enough.

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