PwC role in Mattel reporting under review by U.S. audit watchdog
Accounting giant PwC’s work for Mattel Inc. is being reviewed by the top U.S. audit watchdog after the toymaker said it would restate some previous financial results because of a bookkeeping error, according to a person familiar with the matter.
The Public Company Accounting Oversight Board’s scrutiny comes after Mattel said that some financial statements from 2017 “should no longer be relied upon due to material misstatements.” The El Segundo, California-based company, which makes Barbie dolls and Matchbox cars, also said on Oct. 29 that it found “material weaknesses” in its internal controls for financial reporting.
The PCAOB, a nonprofit corporation overseen by the Securities and Exchange Commission, is the front-line regulator for audits done by the Big Four accounting firms and others. While the review is preliminary and may not lead to disciplinary measures, the PCAOB can fine or sanction firms. Violations of accounting rules can also lead to SEC enforcement actions against companies, auditors or both.
PwC declined to comment when asked about the regulator’s review. The PCAOB and the SEC also declined to comment on the matter.
“The error in the 2017 third quarter was not properly assessed when it was discovered, nor were the findings and conclusions documented as they should have been at that time,” Mattel said in a press release last week. The company didn’t respond to a request for comment on the PCAOB review.
The partner overseeing the Mattel audits has been placed on administrative leave by PwC, according to another person who requested anonymity to discuss internal matters. Mattel said in its Oct. 29 filing with the SEC that its chief financial officer would be leaving the company.
“We will always strive to do the right thing and we will continue to take the appropriate actions in response to any allegations of misconduct,” Megan DiSciullo, a PwC spokeswoman, said in a statement. The firm “takes its role as an independent auditor seriously,” she added.
The Wall Street Journal published an article last Wednesday in which a former Mattel executive accused PwC and the toymaker of purposefully not reporting the accounting error.
DiSciullo, the PwC spokeswoman, said that once the firm became aware of the complaint, it “took immediate action.” She said the auditor reviewed nearly 45,000 documents and 30 interviews and worked with the company to help with its reporting of the investigation’s results.
— Ben Bain and Matt Townsend