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Auditors detail gripes at Molex

Auditors detail gripes at Molex

by Rick Turoczy on December 6, 2004

A seemingly small accounting dispute unfolding at Molex Inc. suggests that landmark reform legislation known as Sarbanes-Oxley may finally be turning some outside auditors from corporate lapdogs into investor watchdogs.

In a little-noticed filing with the U.S. Securities and Exchange Commission (SEC) last week, a letter to Molex from Deloitte & Touche LLP reveals significantly more than was previously public about the dispute. New York-based Deloitte quit as Molex’s auditor Nov. 13 after informing the board of the Lisle company that it didn’t trust Molex CEO J. Joseph King.

The dispute centers on $8 million in inventory that apparently had been counted twice on Molex’s books, as it moved from one unit to another. The electronic components maker took a pre-tax charge equal to that amount in the fiscal first quarter ended Sept. 30 to clear up the discrepancy. But Deloitte says in its letter that Molex knew the size of the inventory problem back in July and withheld that information from Deloitte until October. The firm implies that the charge should have been taken in the fiscal fourth quarter ended June 30. Molex announced its fiscal fourth-quarter and fiscal year results at the end of July.

Auditors detail gripes at Molex

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