Editor’s Note: The headline on an earlier version of this story incorrectly suggested that Navistar had called its finance department “incompetent.” In fact, neither the company, nor the law firm it hired, used that word. CFO.com regrets the error.
Navistar International has taken a large step toward at last becoming current in its financials. The truck and diesel engine maker, which earlier this year was delisted by the New York Stock Exchange for its delinquent filings, filed restated unaudited results for its fiscal years ended October 2003 through 2005.
In addition, a law firm conducting an independent investigation of the issues causing the restatements was very critical of Navistar’s finance department, suggesting that it was incompetent.
The company expects to be current in all filings by the second quarter of 2008, Reuters reported.
“This is a significant milestone toward becoming current in our SEC filings and toward the relisting of our stock on a major exchange,” said Navistar CEO Daniel Ustian. “We are committed to thorough and accurate financial reporting for our shareholders and investment community and to guide our business decisions.”
Navistar said an assessment of its internal controls over financial reporting identified a number of material weaknesses.
The assessment determined a need to establish stronger awareness regarding consistent application of highly ethical standards across all areas of the company, the importance of internal controls over financial reporting, and strict adherence to generally accepted accounting principles.
To address these issues, the company said it has developed a broad and aggressive plan to reinforce within its culture the importance of ethics, integrity, and working in a manner consistent with core company values including accountability and communication.
Among actions taken to strengthen its financial processes, the company has hired more than 50 additional accounting employees; strengthened its finance and accounting leadership; realigned its finance and accounting reporting structure; and hired a new vice president of internal audit, a new chief accounting officer, and a new chief information officer.
In addition, Navistar said it has enhanced company-wide communication regarding the importance of accurate financial reporting and a robust control environment.
The company also said an investigation conducted by an independent law firm determined that most of the errors corrected in the restatement were due to lack of proper accounting knowledge, which resulted in the misapplication of GAAP.
The independent investigation also identified instances of intentional misconduct that resulted in some of the company’s smaller, but in some cases material, restatement adjustments. “Most of the individuals who were involved in instances of misconduct are no longer employed by the company,” Navistar said.
In April 2006, Navistar said it would restate its results for 2002 through 2004 and for the first nine months of fiscal year 2005 as a result of an ongoing review of accounting matters that have prevented the company from filing its 2005 annual report and first-quarter 2006 quarterly report. In addition, the company fired its long-time auditor, Deloitte & Touche, replacing it with KPMG. Deloitte had served as Navistar’s auditor for 98 years.
In June, Navistar promised it would have its fiscal 2005 annual report ready by October. At the time, it said once the 2005 filing is complete, it expected to file annual reports for fiscal 2006 and fiscal 2007 by early next calendar year.