Auditing

Motive Inc. Restates, Looks for Auditor

Mobile data software company completes unaudited filings back to 2001.
Stephen TaubSeptember 5, 2007

Motive Inc. filed restated but unaudited results dating back to 2001 to correct revenue recognition errors.

As a result, the small Austin, Tex.-based provider of management software for broadband and mobile data services reduced revenue by $21 million over a four-year period. The company stressed, however, that the accounting adjustments have no impact on its cash or other liquid assets.

The company also continues to look for a new auditor. In November 2005, its audit committee initiated an independent review and engaged PricewaterhouseCoopers to provide accounting and forensic investigation assistance. When the audit committee completed the review last July 30, it dismissed Ernst & Young as independent auditor and said that Motive would restate previously issued financial statements dating back to fiscal 2001. Prior to and during the period under review, Ernst & Young had been its auditor.

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The revenue problems stem from its earlier acquisition of a company called BroadJump. The committee’s probe had found that certain deferred revenue related that purchase was not valued properly and needed to be restated.

In a statement, chairman and Motive CEO Alfred Mockett said that the company and board have taken appropriate remedial actions to ensure the ongoing integrity of internal accounting and financial reporting. These include a change in management and accounting teams; rigorous enforcement of new policies and procedures; establishment of appropriate checks and balances; and implementation of central controls over revenue recognition.

“Today’s filing of current and restated financial information is a key step in resolving the non-operating issues that have affected Motive over the past two years,” Mockett said. “While we work diligently to retain a new auditing firm and file audited financial statements, we believe making this current information available to the marketplace is important for our investors, customers, employees, and communities.”

Meanwhile, the Securities and Exchange Commission has been formally investigint the company since 2005, and the company’s stock has been delisted from the Nasdaq stock exchange. The shares are currently quoted on the Pink Sheets.

Mockett was hired last year to help the company recover from the accounting scandal. According to the Austin American-Statesman, a study released in July by a law firm commissioned by Motive concluded that CEO Scott Harmon, who had resigned, along with other former Motive executives created a culture of “excessive management pressure” to make sales, without proper accounting and financial reporting.