Mattel’s chief financial officer Joseph Euteneuer will leave the company following an investigation into accounting errors that were raised by a whistleblower.

The company said the investigation, conducted by the board of directors’ audit committee, found income tax expense was understated by $109 million in the third quarter of 2017 and overstated by $109 million in the fourth quarter of 2017, with no impact for the full year.

Mattel said the investigation found it had “certain material weaknesses in its internal control over financial reporting” but it “did not find that management engaged in fraud.”

Joseph Euteneuer

It said it would amend its 2018 annual report to restate its financial results for the third and fourth quarters of 2017 and said it would work to identify weaknesses in its internal control over financial reporting.

Euteneuer was named CFO at Mattel in September 2017. He will stay with Mattel for a transition period of up to six months while the company conducts a search for a new CFO. Euteneuer was previously CFO at Sprint, Qwest Communications, XM Satellite Radio, and Comcast.

In August, the company said it was made aware of a whistleblower letter and was halting the refinancing of senior notes due in October 2020.

“To provide the company with an opportunity to investigate the matters set forth in the letter, the offering of the company’s 6.00% senior notes due 2027 that was scheduled to close on August 8, 2019 has been terminated,” Mattel said in a securities filing.

The company is expected to return to the bond markets to refinance the $250 million of maturing debt.

Mattel reported earnings, excluding one-time items, of 26 cents per share for the third quarter, compared with analyst forecasts of 16 cents per share. It reported revenue of $1.48 billion, compared with $1.43 billion forecast by analysts, according to Refinitiv.

The company’s shares were up 20% in after-hours trading on Tuesday.

Brian Brainerd/The Denver Post via Getty Images

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3 responses to “Mattel CFO to Step Down After Whistleblower Investigation”

  1. Surprised the external auditor firm’s quarterly procedures did not catch this in 2017. Nor did it catch it at year-end. Huh! Under accrued in September, over accrued at year end. Huh! Why the wild fluctuation? Analytical procedures were not very good by Mattel or their auditors. Very strange!

  2. Don’t rely on audits. Its a time pass exercise to create a false impression that things are perfect. Its like a blind folded guy driving on a straight highway. Things will be fine until a curve comes or someone hit from other side.

  3. _We have audited the accompanying balance sheet of ABC Company, Inc. (the “Company”) as of December 31, 20XX and the related statements of income, retained earnings, and cash flows for the year then ended. Look Madams and Sirs, these financial statements are the responsibility of the Company’s management, so we assume they are honest and trustful. Our responsibility is to express an opinion on these financial statements based on our audit, so please understand that we were not there to correct mistakes or wrongdoings for two reasons:
    1 – This is beyond the scope of our audits
    2 – If such disclosure is released in case our audit finds wrongdoings or not trustful reports it may bring some level of discomfort to the companies public investors._

    That´s it. Do you need more arguments?

    After so many financial and corruption scandals during recent years, I keep wondering why Audits, SOx, Procedures Assurance, FCPA Audits, a.s.o still exist as untouchable Goddesses.
    At the end of the day we are all naïves taking care of our own pockets. We like the status quo.

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