Grant Thornton has taken a dramatic step to disassociate itself from its former audit client, Global Crossing, saying it can no longer be involved with the telecommunications company's financial statements, The Street.com reported.
According to a federal filing yesterday, Grant Thornton took the unusual move of withdrawing its Global Crossing audit reports for the last three quarters. Ernst & Young replaced Grant Thornton on April 1, after Grant Thornton complained about Global Crossing's methods, TheStreet.com reported.
Grant Thornton raised questions about what it called "significant deficiencies" that, in the aggregate, were "material weaknesses" in Global Crossing's accounting, TheStreet.com reported, adding that Global Crossing did not have any immediate comment on Grant Thornton's action.
However, the move by Grant Thornton raises new worries about Global Crossing, which had emerged from an ugly phase that culminated in its 2002 bankruptcy. This week's news also stunned investors who bailed out in droves, sending Global Crossing's shares into a plunge.
On Tuesday, Global Crossing announced that it would restate its 2003 financial results due to underestimated access costs, TheStreet.com reported. The company's internal review found that the company has between $50 million and $80 million in understated access liabilities from 2003. These costs are the company's largest expense, adding up to $2 billion last year.
Investors would have preferred that Grant Thornton had been more specific in its earlier reports.
"In each case, GT further advised the audit committee that these internal control deficiencies did not affect GT's unqualified report on the Audited Financial Statements," the Global Crossing filing stated, TheStreet.com reported, adding that Global Crossing says Grant Thornton did not flag any problems with access costs.