Washington, Jan 5 (Inditop.com) Leading US stereo headphone maker Koss Corp has fired its auditor, Grant Thornton, as an expanded internal investigation into alleged embezzlement by an Indian American finance executive turned up new losses totalling $31 million.
Stock in the Milwaukee-based company has not traded since Dec 21, when the company’s vice president of finance, Sujata (Sue) Sachdeva, 46, was charged with embezzling $4.5 million.
The company said Monday that it was evaluating candidates to replace Grant Thornton fired Dec 31. The company expects to have a recommendation on a new auditor from its Audit Committee within the next week.
Koss fired Sachdeva, who has held her current position with Koss since 1992, after an alleged multi-year shopping spree. According to the federal charge, Sachdeva used the money she embezzled to buy millions of dollars worth of expensive clothing and jewellery.
Unable to find room in her home for all of her purchases, Sachdeva rented space to store the clothing, including 1,000 square feet in a Third Ward office building, a media report said.
According to a criminal complaint filed last month in Wisconsin federal court, Sachdeva also used company funds to pay down her credit card bills. Koss said last month it also placed two accounting employees who worked for Sachdeva on unpaid leave.
Koss is also trying to recover merchandise related to the unauthorised transactions of which Sachdeva is accused.
The alleged fraud was discovered after American Express Co noticed that card bills were being paid via several large wire transfers originating from a Koss account.
Sachdeva acknowledged to the FBI that she used her position at Koss to approve wire transfers and falsified Koss’ records to hide her tracks, the complaint said.
Sachdeva is free on an unsecured $50,000 bond, and has turned her passport over to the court. She has not yet entered a plea, and has a court date set for Jan 11.
Koss said it plans to restate its financial statements for at least the past three fiscal years and “has concluded that its previously issued financial statements at least since the end of its 2005 fiscal year should no longer be relied upon”.
Koss said none of Grant Thornton’s audit reports of its financial statements, including for the past two fiscal years, contained an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, scope or accounting principles.
