UK Co. Finds Errors, Fires a Finance Director

E&Y review at Hamworthy, maker of energy-industry equipment, leads to inventory-valuation changes, along with the firing.
Stephen TaubSeptember 3, 2008

Hamworthy, a UK-based maker of equipment for the energy and marine industries, fired a division finance director after discovering accounting errors.

The maker of gas handling, pumping, and water management systems for the merchant marine, cruise, and oil and gas sectors, said an internal review at its inert-gas systems business revealed the accounting errors. They were related to inventory valuation.

The company added that an investigation conducted by Ernst & Young found that inventories and related balance sheet accounts were overstated by $7.8 million over a number of accounting periods ended March 31, 2008. Most of the errors occurred from 2005 through 2007.

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“The board believes that this is an isolated error and has taken immediate action to improve processes, strengthen internal controls and management within the inert gas systems business to prevent any recurrence,” the company said in a press release. It said that there was no indication of any theft, misappropriation of group assets, or personal gain related to the mistakes.

Even so, Hamworthy said the finance director of the inert gas systems business “has been relieved of his duties,” and that an acting finance director has been appointed until a permanent replacement can be recruited. It did not identify the names of the fired executive or the individual who was given the interim position.

The inert-gas systems business accounts for about 10 percent of the group’s operating profit.