"Accordingly, Grant Thornton concluded that they could not render a report or otherwise complete an audit of the company's 2001 financial statements in accordance with Generally Accepted Auditing Standards," the filing said.

And finally, E-Rex Inc. said it engaged Parks, Tschopp, Whitcomb & Orr as its auditor, replacing Perez-Abreu Aguerrebere Sueiro. That firm resigned as the company's auditor on February 4. The filing didn't say why the auditing firm resigned, just that it did.

Management at the Miami-based E-Rex, which operates an Internet Web-hosting service, said the decision to change auditors wasn't approved by the board or by any committee. Why? Because the previous auditing firm submitted its resignation.

During its engagement by the company, Perez-Abreu didn't issue an audit opinion with respect to any financial statements of the company, the filing said. And E-Rex management said there were no disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

More Restatements
GenCorp Inc. is the latest large-cap company to restate its results.

Management at the aerospace, defense, chemical, and automotive manufacturer said Wednesday that accounting issues at the company's GDX Automotive business forced it to restate its results from 1999 through the first nine months of 2001.

GenCorp management said the revisions relate mainly to the correction of errors in accounting for customer-owned tooling and inventory, and the recognition of liabilities at one of its GDX Automotive manufacturing plants.

Meanwhile, prison builder and operator Cornell Cos. announced Wednesday that it would restate its financial numbers for the fiscal year ended December 31, 2000, and for the first three quarters of 2001. The company noted that a special committee, composed solely of independent directors, was formed to review the company's accounting treatment for an August 2001 sale/leaseback transaction. In the course of that review, the committee also examined the accounting treatment for the company's 2000 synthetic lease transaction.

Stated the company: "Following discussions with its independent auditors and outside advisors, and in view of anticipated changes in accounting rules governing these types of transactions and the desire to reach a final resolution of these matters as quickly as possible, the company has decided that both transactions will be consolidated for financial accounting purposes in the restated reports and for future periods." While they're at it, they might want to consider consolidating that sentence, too.

"In today's market," Cornell management went on, "we believe that the consolidated accounting treatment for the two transactions provides for greater transparency in our financial statements."

The immediate effect of the restatement? Cornell will need waivers of certain covenants under the company's senior credit facility. Based on discussions with its lenders, Cornell management expects to reach agreements to waive and/or restructure those covenants.

Short Takes

• Metromedia International Group Inc.'s board considered and unanimously rejected a shareholder proposal to require all directors to stand for reelection in the same year. This would have made it easier for the company to be taken over by a hostile acquirer.
  
  

• Merrill Lynch & Co. announced on Wednesday it might sell $1 billion of zero-coupon bonds convertible into company stock, also known as "liquid-yield option notes," or LYONs. The bonds will have a floating-rate structure, and will not generate regular interest payments (RIP), which is unusual for this security, according to published reports (ATPR).
  
  

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