SEC Probes Accounting At InterpublicNov 20, 2002 | FT.COM
Interpublic Group said on Tuesday the Securities & Exchange Commission had launched an investigation into the accounting problems that have plagued the world's second-largest advertising group since August.
Interpublic admitted last week it had overstated results by $180m wider than the $68m error it had flagged in August.
Company officials emphasised that they believed all the accounting errors, which were uncovered primarily at the McCann-Erickson's European arm, had been found. "We have been diligent and thorough in our review process and are confident that we are taking the necessary steps to ensure the mistakes that led to the restatement do not recur," said John Dooner, chairman and chief executive.
Interpublic said on Tuesday it had been informed by SEC staff that it is conducting an "informal inquiry" into the accounting problems. Interpublic said it had identified $101m in intracompany charges at McCann-Erickson that had been included in accounts receivable rather than being expensed. In addition, the company said it had uncovered $36.3m related to "estimates of insurance proceeds not yet realised" and other costs that had been capitalised rather than expensed.
Finally, $44m at other Interpublic agencies was "related to understated liabilities" dating to 1996.
The company acknowledged the SEC inquiry as it reported third-quarter earnings, which were delayed by a week due to the accounting irregularities. The earnings results were well below forecasts, due in part to "unanticipated operating costs" at McCann-Erickson, its largest operating unit. Among those higher costs were payments to auditors and attorneys who participated in the review of the accounting errors.