The Hindu : Xerox filing shows $71.6 m to auditor

Online edition of India's National Newspaper
Friday, Jul 05, 2002

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Business

Xerox filing shows $71.6 m to auditor

NEW YORK JULY 4. The Xerox Corp.'s much publicised accounting problems cost the company more than a $10 million fine and a depressed share price.

According to the preliminary 2001 proxy that Xerox filed on Wednesday with the Securities and Exchange Commission, Xerox paid PricewaterhouseCoopers, the accounting company that replaced KPMG as its auditor, $71.6 million last year.

The fees covered auditing duties as well as consulting assignments. The practice of allowing the same firm to handle both types of assignments has emerged as an issue in the recent accounting corporate scandals, raising concerns about a conflict of interest.

A Xerox spokeswoman, Christa Carone, said that PricewaterhouseCoopers had served as a consultant before it was auditor and that the knowledge it had gleaned made it a shoo-in for the auditor's role. "They'd become familiarised with our business and operations,'' Carone said, "and that made for an easier transition from KPMG.''

Specifically, Xerox paid PricewaterhouseCoopers $10.4 million for auditing current statements, $21.2 million for reauditing past statements, $19.6 million for helping Xerox install a new financial information system, and $20.4 million for forensic accounting — helping Xerox investigate the accounting methods that the SEC was investigating.

Like KPMG, the firm endorsed Xerox's position that its methods for accounting for equipment leases were in line with generally accepted accounting principles, a position that Xerox nonetheless abandoned last week, when it said it would restate $6.4 billion in revenues and profits stemming from 1997, and change its accounting methods. In the proxy statement, Xerox also said that three directors, Martha R. Seger, George J. Mitchell and Thomas C. Theobald, were resigning. Theobald had led Xerox's audit committee.

"My particular responsibilities with Xerox's audit committee have related to a series of now completed projects,'' Theobald wrote in his resignation letter. "A new audit committee head can move forward with a clean slate.''

The proxy also asked for authorisation to issue 700 million new shares, the clause that Carone said was the decisive factor on the proxy's timing.

Xerox issued the proxy late Wednesday afternoon, when many offices had emptied early for the holiday weekend.

The company expected to be criticised for its timing, but Carone said it was unavoidable because the SEC expects to see a request for more shares 90 days before the vote. Xerox's annual meeting is scheduled for September 9. The company said it would start mailing the proxies to shareholders on or about July 29.

— AP

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