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Amid news that Groupon had to revise its Q4 earnings due to higher than expected number of refunds, there’s also this: Groupon’s auditor, Ernst & Young, just filed a “statement of material weakness” to the SEC.What’s that mean?
According to Investopedia:
A material weakness, when reported by an auditor, simply suggests that a misstatement could occur. If a material weakness remains undetected and unresolved, a material misstatement could eventually occur in a company’s financial statements, which would have a tangible effect on a company’s valuation. For example, a $100 million overstatement in revenue would be a material misstatement for a company generating sales of $500 million annually.
Our best translation: Ernst & Young is covering its arse, telling the SEC not to hold it responsible for Groupon accounting errors going forward.
Who can blame them? Groupon has a history of weird accounting. It used to call itself profitable, booking marketing expenses as a capitol cost. It also had a funny way of counting its revenues for a while. Now there’s today’s news.
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