KPMG Concerns Lead to Client Management Changes
The CFO of a leading health services provider lost his job last week after he asked his company’s auditor to provide a representation letter concerning their ongoing review of the company’s financial statements and disclosures.
Universal Health Services announced Thursday night that the board of directors had voted to dismiss Kirk Gorman, chief financial officer since 1987, at the request of KPMG, which had recently replaced Arthur Andersen as the company’s auditing firm.
Gorman, who is not an accountant, wrote a letter to KPMG on Feb. 12 stating that since he was relying on the firm’s advice on technical accounting issues, he needed assurances from them as part of his due diligence. KPMG responded that Gorman’s letter raised reservations about his competence and told the board of directors that they would certify the financial statements only if Gorman were fired.
There were no disputes between Gorman and KPMG regarding accounting issues and Gorman had signed a representation letter for KPMG attesting to the accuracy of his company’s financial statements.
The day after Gorman’s dismissal Universal Health’s stock plunged to a 30-month low, prompting one analyst to say that Gorman’s firing was not in the best interest of the company’s stockholders.