Internet retailer Overstock.com has dismissed Grant Thornton as its auditor and opted to file an unaudited version of its third-quarter financials.
The Salt Lake City-based retailer issued a press release Monday, quoting philosopher Friedrich Nietzsche to explain the unorthodox decision: All things are subject to interpretation; whichever interpretation prevails at a given time is a function of power and not truth.
The companys outspoken chairman and CEO, Patrick Byrne, said the dismissal came after Grant Thornton advised Overstock to restate its 2008 financials in order to record an additional $785,000 in assets stemming from an overpayment to a business partner. The amount had been included in the companys first quarter 2009 financials, which had provoked a comment letter from the SEC asking the company to justify the accounting treatment.
Byrne said that Overstocks previous auditing firm, PricewaterhouseCoopers, had agreed last year with the decision not to book the overpayment in 2008, and Grant Thornton agreed with the decision as recently as late October 2009. However, the firm decided otherwise last week and advised Overstock to restate its 2008 financials and amend its previous quarterly filings for 2009.
We disagree with Grant Thornton, said Byrne in a statement. We, along with PwC, continue to believe that we have accounted for the $785,000 correctly and thus our Q1 and Q2 financial statements are correct. Both we and PwC believe that it is not proper to reopen our 2008 Form 10-K, subject to resolution with the SEC of its comment letters. Thus, we are in a quandary: one auditing firm won't sign-off on our Q3 Form 10-Q unless we restate our 2008 Form 10-K, while our previous auditing firm believes that it is not proper to restate our 2008 Form 10-K. Unfortunately, Grant Thornton's decision-making could not have been more ill-timed as we ran into SEC filing deadlines. As a result, we have elected to dismiss Grant Thornton, file an unreviewed Q3 Form 10-Q (as we have no current auditor), continue to work with the SEC on the issues addressed in its comment letters, and engage another independent audit firm. Once we have completed these last two items, we will file a reviewed Q3 Form 10-Q/A. In the meantime, I will continue to focus on the business during this busiest part of the year.
In response to a request for a comment, a Grant Thornton spokesperson replied, Due to client confidentiality requirements and as a matter of firm policy, we do not comment on the work provided to clients, but believe that our services complied with professional standards.
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