US software company, Motive, has dropped Ernst & Young as its auditor
after finding irregularities with its own accounting practices during an
investigation by the audit committee.
The company, which is a provider mobile communications and broadband
services, filed reports detailing several instances in which an E&Y partner
disagreed with the company’s accounting for software license agreements with
The firm told Motive that its internal controls – at the time at which E
&Y was preparing to do an audit – were ineffective. The firm also noted
‘management’s intentional misrepresentation and omission from the financial
statements of material facts surrounding a reseller transaction’.
The investigation – conducted with the assistance of a law firm hired by the
company’s new auditors, PwC – slated former Motive management for excessive
pressure to close deals which had not been properly accounted for,
This led to the CEO Scott Harmon and his CFO, Paul Baker stepping down after
a show of no confidence by the audit committee.
Motive is to restate financial statements from 2001 but remains un-audited
for 2005, 2006, and the first half of 2007 will be available by the end of
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