Accounting Observer > Public Blog - CSK Auto: Follow-through

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CSK Auto: Follow-through

Location: Blogs AAO Weblog (Public)
Posted by: Jack Ciesielski	9/29/2006 6:59 AM
About six months ago, CSK Auto announced that they were investigating inventory and vendor allowance problems and issued the now-traditional non-reliance 8-K filing. Yesterday, they released the preliminary results of their investigation. An excerpt from their most recent press release filed with yesterday's 8-K: "Based on preliminary results of the investigation, the Company previously announced probable maximum estimated overstatements relative to its previously filed October 31, 2005 balance sheet of approximately $70 million in inventory and $12 million in vendor allowances. As previously reported, the Company also identified an estimated overstatement of between $3 million and $7 million of store surplus fixtures and supplies. In addition, it is expected that the restatement will result in material changes that both increase and decrease previously reported results of operations for the periods that will be restated. At this time, no facts have been developed that would indicate that any of the foregoing items would have a material adverse effect on historical revenues or cash flows or on the Company's ongoing or future business operations." The company has yet to file financials for its 2006 operations. The problems noted above go back to 2003; the previously filed financials haven't been restated yet either, but they're pending. The company's president and its CFO, "as well as several other individuals in the Company's finance organization are no longer employed by the Company." The item is a curiosity because none of these issues mentioned are at the cutting edge of accounting theory. We're talking about accounting for inventory, what to do with credits given by suppliers, and how to account for store fixtures - not exactly on the same level as accounting for fair values of derivative instruments. It's basic blocking and tackling for retailers. And it demonstrates the need for assessing controls involving basic blocking and tackling. The firm identified the issues in its first Section 404 review last year.

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