Brazil’s Federal Accounting Council is probing Carrefour SA’s local auditors after the world’s second-largest retailer reported writedowns at its Brazilian unit that were more than three times higher than expected.
“The council will form a working group that will establish the kind of information we’ll request,” Juarez Domingues Carneiro, the council’s president, said yesterday in a telephone interview from Paris. “It’s necessary to investigate the responsibilities. The council will investigate whether there was a fraud.”
The probe into accountants at Deloitte & Touche LLP comes less than a month after the council, an industry group with power to fine, suspend or ban accountants from working, began looking into auditors of Banco Panamericano SA, the Sao Paulo- based bank that required a 2.5 billion-real ($1.5 billion) bailout after regulators found accounting irregularities. Deloitte, based in New York, also worked for Panamericano.
Carrefour’s one-time charges in Brazil will total 550 million euros ($722.8 million) this year, up from an October estimate of 180 million euros, the Paris-based company said Nov. 30. Carrefour replaced its management team in Brazil and hired KPMG LLP to audit the unit’s accounts, the retailer said in October. Carrefour will co-operate with any investigation by authorities in Brazil, a company official said yesterday.
Deloitte said in a statement yesterday it hasn’t been alerted by Carrefour on the adjustments to its financial results for this year, and the accounting firm can’t comment on the changes.
Carrefour rose 2.8 percent to 33.83 euros in Paris trading. The stock dropped 5.6 percent yesterday, its biggest decline since May. Panamericano gained 2.7 percent to 4.60 reais in São Paulo trading at 1 p.m. New York time. The bank has plummeted 32 percent since Nov. 9, when the rescue was disclosed and the central bank opened an investigation, through yesterday. Prosecutors have since begun a probe into allegations of fraud at the bank.
Grupo Silvio Santos, the bank’s controlling shareholder, said after the bailout that it hired PricewaterhouseCoopers LLP to investigate Panamericano’s accounting irregularities, according to an e-mail from the group’s press office. Panamericano also replaced its board and chief executive officer. Deloitte sent a statement at the time declining to comment.
Carrefour has also commissioned a separate probe to determine who may be responsible for the changes.
“In the past month, two cases appeared,” Carneiro said. “It may be isolated situations or it may have something that we don’t know.”
Depending on the outcome of the investigations, accountants may be warned, fined, suspended or banned, Sergio Prado de Mello, the council’s vice president for oversight, ethics and discipline, said in a telephone interview in Sao Paulo yesterday. The council is first collecting data, including financial statements, Mello said.
“Then we’ll ask the auditing company to make its case,” Mello said. The council, which gained the power in June to ban accountants from the profession, has never taken such an action, he said.
Brazil’s Federal Accountant Council received documents from the country’s central bank on Panamericano on Nov. 25, Carneiro said. He said the council is still waiting for Panamericano and Deloitte to file the documents to proceed with the investigation. Deloitte said it didn’t receive any request from the council seeking information on Panamericano, according to an e-mailed statement yesterday.
“We are determined to do what it takes to get to the bottom of this and clean up what I call earlier mismanagement,” Carrefour Chief Executive Officer Lars Olofsson said Nov. 30 on a conference call. The situation in Brazil, which was discovered by Carrefour’s internal teams, is “flabbergasting” and “a malfunction that evidently we cannot accept,” he said.
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