Overstock Inc., which has filed an unaudited third quarter financial statement with the Securities and Exchange Commission (SEC), because it had fired its auditor, Grant Thornton, has accused the accounting firm of lying about whether it had approved some of the company's accounting. "They are saying we are liars, and you know what, we're not", Overstock President Jonathan Johnson said last week
In a letter to the SEC, Grant Thornton had accused Overstock of making an inaccurate statement about Grant Thornton's position on an accounting issue in their unaudited filing.
Johnson said that he was surprised at "just how inaccurate" Grant Thornton's letter was, indicating its statements are proof that the decision by the company's audit committee to dismiss Grant Thornton was correct, the Salt Lake Tribune reports.
The fight centers on how Overstock should have handled the financial reporting of a $785,000 overpayment to a business partner that occurred in 2008, and when Grant Thornton, which had signed off on the first and second quarter financial statements, decided the accounting treatment of the overpayment was "in error". Overstock replaced PricewaterhouseCoopers as their auditor with Grant Thornton in 2009.
The amount of money involved in the disputed accounting treatment is relatively small. Grant Thornton claims that it was unaware of the overpayment until October. "In paragraph 7 of the filing, Overstock said 'that upon further consultation and review within the firm, Grant Thornton revised its earlier position' regarding the previously filed 2009 interim financial statements. This statement is not accurate. The Company brought the overpayment to a fulfillment partner to Grant Thornton's attention in October."
Overstock CEO Patrick Byrne said that Grant Thornton had only recently told them to remove the $785,000 partner overpayment from the first and second quarter statements, which would have required them to restate their 2008 results. "We [had] decided it would be a mistake to book this overpayment as an asset as of December 31, 2008, deciding instead to recognize the sums as we recovered the money, that is, we thought the conservative position was the correct position", according to a report in the Salt Lake Tribune. PricewaterhouseCoopers signed off on Overstock's 2008 financial statements.
In its statement to the SEC, which has been looking into Overstock's accounting, Grant Thornton said it had determined the company's position as to the accounting treatment for the overpayment "was in error", but that it "did not take a position as to whether the company's financial statements for the year ending December 31, 2008, should be restated", the Tribune reports.
Overstock is now looking for another auditor.