Florham Park, N.J. (May 3, 2004) -- Grant Thornton distanced itself from its former audit client, Global Crossing Ltd., by withdrawing its audit reports for the telecommunications giant after the company said that it would restate its results for fiscal 2003 and 2002 due to concerns about the adequacy of its accrued cost of access liability.
The Chicago-based accounting firm, which was dismissed by Global Crossing on April 1 and replaced by Ernst & Young, said that its audit reports for the three previous quarters "can no longer be relied upon in light of the company’s recent announcements," Global Crossing said in a filing with the Securities and Exchange Commission.
Global Crossing last week said that the concerns were raised by its management while it was preparing its financial statements for the first quarter of 2004. The company is still reviewing its financial statements. Cost of access includes usage-based charges paid to other carriers to originate and terminate voice services, leased line charges for dedicated facilities and local loop charges, and usage-based Internet peering charges.
Global Crossing said that a preliminary review showed that it understated its accrued cost of access liability at year-end 2003 by between $50 million and $80 million. The company said that most of the understatement was the result of incorrect estimates of cost of access expenses and the failure to reconcile the expenses to vendor invoices.
In a statement issued April 27, the company said that it "is assessing the internal control issues presented and, in light of the expected restatement, currently believes that these issues constitute a material weakness in its internal controls. The company is undertaking steps to address these internal control issues."
Global Crossing said that its financial statements for the years ended Dec. 31, 2003 and 2002, and its guidance concerning its 2004 results should be disregarded pending the outcome of the review. The company postponed its first quarter earnings release as well as its shareholders meeting, originally planned for June.
-- WebCPA staff
