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Everett, Wash. (Aug. 13, 2002) -- Home improvement chain Thurman Industries Inc. has reportedly sued its auditor KPMG and two of the firm's partners, claiming that the firm failed to detect $1.6 million in accounting manipulation by its controller over four years.According to the Puget Sound Business Journal, the lawsuit said that if the company's management understood its true financial footing, the chain would have closed some stores earlier and wouldn't have made certain capital improvements or paid performance-based bonuses. After management uncovered the deception, its bank reportedly called Thurman's loans, forcing it to obtain new financing on far less-favorable terms, driving the company "to the brink of insolvency, bankruptcy and financial ruin," the suit claimed. The company, which once had 18 stores throughout the Northwest, has reportedly had to close all but five of its stores.
Thurman chief executive Kenton Thurman reportedly asked KPMG to conduct full audits, rather than simply reviewing the company's financial statements, because he had personally guaranteed the company's loans. The suit says the company's controller overstated cash balances between 1995 and 1998, and concealed the overdrafts by creating bogus offsetting accounts receivable. The controller reportedly confessed the deceit to Thurman in the summer of 1999.
KPMG, which has audited the company's books since 1983, has asked the court to dismiss the suit on grounds that there was no misconduct on the part of the auditors, PSBJ said. According to the paper, KPMG said the claims "are completely without merit" and a complaint by the audit firm said Thurman's CFO falsified documents given to KPMG and actively misled both KPMG and Thurman's banks. A hearing is set for early September on KPMG's request that the case be dismissed.
-- Electronic Accountant Newswire staff
