Think the 2002 Sarbanes-Oxley Act is toothless?
Met-Pro Corp. this morning disclosed that it would restate its financial results for each quarter since Jan. 31, 2007, after discovering errors made by a non-officer level sales employee.
The errors center on the premature recognition of net sales and net income. The Harleysville company had this to say:
The financial statement errors were the result of unauthorized actions by one non-officer level sales employee, in violation of the Company's policies, including its revenue recognition policy. The employee has since been placed on administrative leave pending further investigation.
Shares of Met-Pro were down 10 percent, or $1.06, to $9.96 around noon.
On first glance, the restatement would lower net sales and net income by a small amount in each period. For example, for the fourth quarter ended Jan. 31, 2007, net sales would be restated as $21.7 million, from the reported $22.5 million, while net income would be restated as $1.7 million, or 11 cents per share, from the reported $2 million, or 13 cents per share.
Still any whiff of uncertainty unnerves investors. And violations of generally accepted accounting practices are what spawned the Sarbanes-Oxley reforms in the wake of the collapse of Worldcom. The chief executive officer and chief financial officer personally sign off on those quarterly financial statements, asserting their accuracy. So when a problem occurs, companies have been quick to disclose it.
"These unauthorized actions, which involved a limited number of transactions, casued the Company to recognize net sales and net income prematurely in violation of our policies," said Raymond J. De Hont, chairman and CEO of Met-Pro, in the statement.
"The actions by this employee are irregular, and the employee will be dealt with accordingly."
