ERNST & YOUNG BOWING OUT AS AUTHENTIC FITNESS AUDITOR
Byline: Thomas J. Ryan
NEW YORK — Ernst & Young LLP recently informed Authentic Fitness Corp. that it has decided “not to stand for reappointment” as independent auditors for the company, and it has been replaced by Price Waterhouse LLP.
The change is noted in an Authentic Fitness filing with the Securities & Exchange Commission.
Authentic Fitness noted that E&Y’s comments in its financial statements for the last two years ended July 6, 1996, and July 1, 1995, included no adverse opinions, disclaimers or qualifications in regards to accounting principles.
However, during those years, E&Y had notified Authentic Fitness about “certain weaknesses in the company’s internal accounting controls and procedures,” the filing said.
Among the matters cited were “the valuation and adjustment of inventory and other account balances,” according to the filing.
In the filing, Authentic noted that it has improved inventory controls, implemented supplemental procedures to review and adjust interim balance sheets and income statements and hired additional financial and accounting personnel. Also, changes such as subcontracting its production control and manufacturing functions and exiting its outlet store business has eliminated certain inventory control issues.
In a telephone interview Thursday, William Finkelstein, a director at Authentic Fitness, called E&Y’s concerns over its accounting procedures “constructive letters” typical of auditors. Including such information in SEC filings is “routine” when companies switch auditors, he said.
Moreover, he said, E&Y had not worked with Authentic since June 1996, and Authentic moved to hire Price Waterhouse, both to save money and because they have worked well as auditors for Warnaco Group. Both Warnaco and Authentic are headed by Linda Wachner as chief executive officer.
“We were very impressed with the work Price Waterhouse has done on the Warnaco side and felt we would bring them over to Authentic Fitness,” Finkelstein said. Finkelstein is senior vice president and chief financial officer for Warnaco.
E&Y had notified Authentic Fitness that it intended to step down on March 21, the filing said, and Price Waterhouse was hired on March 26.
An E&Y spokesman said, “In keeping with professional standards, we don’t comment on client matters.”