Deloitte & Touche: Quality Control Under Fire
Accounting firm Deloitte & Touche repeatedly failed to support its assumptions in problematic audits first flagged in a 2007 inspection, the industry oversight board said in a report. The Public Company Accounting Board investigated Deloitte’s practices in 2007 and found instances when the firm relied too heavily on its clients’ valuation of assets and assumptions on income taxes. The watchdog also said Deloitte did not sufficiently monitor its foreign affiliates. Deloitte says it’s working to improve its practices. This is the first time the board released a detailed report saying a Big Four accounting firm did not resolve problems the board had previously identified.
Gap: Closing Namesake Stores
Ailing clothier Gap plans to shut a fifth of its namesake stores in the U.S. by the end of 2013, as it emphasizes opening new Gap and Banana Republic stores abroad. The company is set to open its first South American Gap store in Chile this month and in Panama and Colombia next year. It also has set a target of operating 45 Gap stores in China by the end of 2012, triple what it plans to have by the end of this year. The company is looking for growth online and will expand its pilot program that ships online orders directly from stores.
Research In Motion: A New Operating System
Research In Motion unveiled a new operating system designed to help developers create applications for its BlackBerry smart phones and tablet computers. It hopes to recoup market share lost to Apple’s iPhone and devices running Google’s Android software, which both have robust app stores. RIM didn’t say when the software, called BlackBerry BBX, would be available. The announcement comes on the heels of a four-day-long outage of RIM networks that restricted access to its services on several continents.
Royal Philips Electronics: Major Layoffs Ahead
As part of a plan to trim costs by $1.1 billion a year, Royal Philips Electronics plans to cut 4,500 jobs after its quarterly profits fell to $520 million, the lowest in almost two years. About a quarter of the job reductions will come from the company’s headquarters in the Netherlands. Philips will also cut overhead expenses, such as real estate and information technology. The stock rose as much as 3.8 percent in Amsterdam after the company announced the cuts. The company said in April it aims to pull out of TV production.
Citigroup: No More Prop Trading
In the face of new financial regulations, Citigroup plans to close a proprietary-trading unit that incurred losses in the third quarter. The so-called Volcker Rule prevents banks from trading for their own accounts, though they can still make short-term trades for hedging and market-making. Goldman Sachs and Morgan Stanley have exited similar businesses. Citi also agreed to pay $285 million to settle SEC claims that it marketed to investors a mortgage security that it also bet against. It neither admitted nor denied wrongdoing.