Accounting & Tax

Publisher Blames Finance VP for Errors

An audit committee investigation at ProQuest found that certain deficiencies in internal controls allowed a former finance executive to increase cu...
Stephen TaubAugust 2, 2006

An internal probe at an educational publisher found that the former vice president of finance at one of its units “bears primary responsibility for the accounting misstatements” that forced the company to restate results.

ProQuest said the investigation by its audit committee and outsiders, including law firm Skadden, Arps, Slate, Meagher and Flom and consultancy Chicago Partners, found that the finance executive at its Information and Learning business unit—whom the company did not identify—exercised primary control over the financials in which “significant misstatements were identified.” The audit committee report continued that the executive, “regularly directed that manual journal entries, many of which were erroneous,” be made in several financial reports, especially during month-end and quarter-end closes.

The company elaborated that the net effect of the manual entries was to increase current-period net income by decreasing expense or increasing revenue. It also said that other than two employees reporting to, and acting under the direction of the former vice president of finance, there is no evidence that any other employee, officer, or director of the company had any direct knowledge of, or involvement in, the accounting misstatements.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

In February, ProQuest officials announced that the company discovered material irregularities in its accounting, primarily at its Information and Learning division, causing it to restate previously issued financial statements. In an announcement earlier this week, company officials conceded that ProQuest had certain deficiencies in internal controls that allowed the former finance executive to engage in improprieties.

The audit committee report stressed that, there was “no evidence” that the finance executive faced “undue pressure from corporate management to attain certain results.” The audit committee also directed the implementation of several remedial measures as a result of its investigation, including enhancing internal controls by appointing a new head of internal audit, and conducting a review of the scope of duties assigned to the internal auditor.

Officials also noted that the company will take appropriate remedial measures regarding employees responsible for the accounting misstatements. “The Audit Committee is very satisfied with the thoroughness of this investigation, and the company’s commitment to fully implement the necessary steps to ensure such a situation never happens again,” said Gary Roubos, chairman of the audit committee, in a statement.

The company also said it shared the results of the investigation with the Securities and Exchange Commission, which it previously disclosed, has opened an investigation as a result of the accounting irregularities.

The company emphasized that it is cooperating with the probe.