PracticeAuditDeloittes backs down on eps miscalculation

Deloittes backs down on eps miscalculation

Deloitte & Touche has backed down in its dispute over a diluted earnings per share calculation for its client XKO and has decided to stop recommending its own guidance.

Financial monitor Company Reporting confirmed yesterday the Big Five firm has said it would no longer recommend to its own staff that they follow the guidance for eps contained in its GAAP 2001.

A statement from Company Reporting said: ‘So what has this case told us -apply a little common sense – if it doesn’t make sense than don’t do it – don’t just take your auditors word for it because sometimes even they get it wrong.

Company Reporting’s whistleblower section revealed its concerns a few weeks ago over an eps calculation for XKO, a small IT business.

According to the monitor, material errors by XKO and its auditor Deloittes Birmingham, meant the eps figure was not calculated in accordance with accounting rule FRS 14.

Company Reporting pointed out that under the standard the shares were anti-dilutive and so should not have been included in the eps calculation.

Hitting back, Andy Simmonds, technical partner at Deloittes, said: ‘Company Reporting is one of our least favourite publications. we are not impressed with it and its technical analysis is often not very good.

‘In the precise circumstances of this one the ASB have recognised that our interpretation of this was the correct one even though it didn’t make the most sensible answer.’

Simmonds added that the ASB is now poised to alter the accounting rule and the firm will adopt the new interpretation.

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