Deloitte On The Hook For Dick Smith Accounting?
A potential breach of accounting standards uncovered by Dick Smith liquidators McGrathNicol could see the company go up against accounting firm Deloitte.
As reported by ChannelNews yesterday, the second meeting between Dick Smith creditors and McGrathNicol saw the remnants of the company move into liquidation with an expected shortfall of $250-270 million.
The key issue here is the rebates.
“Ultimately, buyers were making decisions to buy stocks because rebates were available… and certainly some of those rebates are rebates that had a profit impact at the time the stock is bought as opposed to when the stock is sold,” Mr Preston said to the media after the Monday meeting.
UTS accounting professor Peter Wells told the Australian Financial Review that a close reading of the creditors’ report suggests at-least some of the rebates were classified as marketing rebates instead of inventory ones, inflating the company’s profits in 2015.
“If getting the rebate is the motivator for purchasing the inventory, that starts to erode any presumption that the rebates were marketing,” he said.
With McGrathNicol now playing the role of the liquidator, the AFR’s Misa Han suggested that they could “potentially go after Deloitte for negligence on behalf of shareholders and creditors are out of pocket because they relied on the report.”
In response to this, a Deloitte spokesman told the publication that “Deloitte stands behind its audit.”