Marriott Says E&Y Disclosed Possible Independence Problems

Marriott International Inc. has revealed that Ernst & Young informed the company about nonaudit work it performed for hotel employees in China that could raise independence issues.

Marriott, in a quarterly filing with the Securities and Exchange Commission Monday, reported that Ernst said it had done tax calculation and preparation work for Marriott employees in Beijing from 2001 through May 2004. The auditor also said that affiliates made tax payments on behalf of Marriott, a practice barred by the SEC's rules on auditor independence, Dow Jones Newswires reported.

Marriott said Ernst & Young told its audit committee that the firm doesn't believe the holding and paying of the tax funds harmed Ernst's independence. The nonaudit tax work in China is similar to work Ernst did for other clients that decided the work did not impair independence.

Marriott also said it does not know of any other nonaudit services that may compromise Ernst's independence as its auditor.

Ernst & Young has notified the SEC and the Public Company Accounting Oversight Board about the potential independence problems.