Today (bold added by me):
USNAannounced Wednesday that PricewaterhouseCoopers has been hired as the company’s new independent auditor. We are encouraged by this news as we view PwC’s new role as a sign of Usana’s financial legitimacy; however, we are still wary of Usana’s management team. PwC will immediately begin reviewing Usana’s second-quarter results, which were filed but never reviewed by an independent auditor, thereby making the company delinquent in its regulatory filings. Usana did not disclose the fees it will pay PwC but will provide further details in an 8-K, which management expects to file soon. While we don’t anticipate any major changes to our fair value estimate from either the 8-K or amended 10-Q, we will review both filings carefully and adjust our projections accordingly.
A few questions that have been posed to me:
Question: Is retaining PwC a good thing for Usana?
Answer: Sure. They’ve gotten themselves an auditor with a big name. What’s not to like?
Question: Is this a good thing for PwC?
Answer: It’s all relative. In terms of fees, it’s fantastic. You can bet PwC is going to charge Usana 3 or 4 times (or more) than the previous auditors did. In terms of risk, not so much. PwC is clearly assuming a lot of risk with this engagement.
Question: Does this add legitimacy to Usana?
Answer: Not for people who know the first thing about auditing and fraud.
Question: What about the fact that PwC is going to be reviewing quarterly financial statements?
Answer: “Reviews” by auditors are of very limited usefulness. I would expect them to bless the second quarter numbers with little or no changes. A review is a very low standard in terms of the procedures performed on the financial statements.