Two weeks after ousting former auditor KPMG LLP, beleaguered mortgage giant Fannie Mae has hired Deloitte & Touche LLP to perform its 2004 audit and to re-audit prior period financial statements that it will restate.
Fannie Mae said that it will review the terms of the engagement with its regulator, the Office of Federal Housing Enterprise Oversight.
As part of its agreement with the OFHEO, the board this week named as interim chief risk officer Adolfo Marzol, Fannie Mae's senior vice president for corporate strategy. Marzol previously served as the company's chief credit officer.
In late December, the mortgage finance concern ousted two top executives and its long-time auditor, KPMG, following a Securities and Exchange Commission decision that Fannie Mae violated accounting rules, leaving it faced with a massive restatement. In the wake of the SEC's request that it restate past earnings, Fannie Mae's audit committee dismissed KPMG, which had served as its auditor for more than three decades. At the same time, chairman and chief executive officer Franklin D. Raines retired and vice chairman and chief financial officer J. Timothy Howard resigned. Howard also resigned from the board.
Fannie Mae had warned in November that if its accounting for some derivatives was deemed incorrect, it could have to restate earnings and report an after-tax loss of $9 billion on those transactions.
Last week, Fannie Mae revealed in an SEC filing that KPMG had notified the embattled company that it had discovered indications of weaknesses in its internal controls. Fannie Mae said that the Big Four audit firm unearthed deficiencies with regard to its quarterly closing processes and that entries had been made after the books had been closed for the quarter that ended Sept. 30.
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