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Depot sacks four after accounting review
November
2007 — Delray Beach (FL): Office Depot has identified “a material
weakness in its internal controls” and has sacked four members of its
merchandising staff following the release of the Audit Committee’s
findings from a review of the company’s accounting for certain vendor
programme funds.The investigation revealed errors in timing of vendor
programme recognition and included evidence that some individuals
within the company’s merchandising organisation failed to provide
Depot’s accounting staff with complete or accurate documentation of
future purchase or performance conditions in certain vendor programmes
that would have required recognition of the related vendor funds to be
deferred into future periods.The Committee said that during the
period beginning in Q3 2006 and ending Q2 2007 funds due, or received,
from vendors previously recognised in the current quarter should have
been deferred into later periods.The anticipated impact of these errors
will reduce gross profit, operating profit, net earnings and EPS in
prior quarters and will result in related amounts being recognised in
future periods. Depot estimates that it will reduce diluted EPS by
$0.02 in Q3 2006, $0.03 in Q4 2006, $0.01 in Q1 2007, and $0.02 in Q2
2007. The diluted EPS impact of approximately $0.07 per share will be
recognised beginning in the second half of 2007 and in decreasing
amounts in years from 2008 through 2010.Depot anticipates making all
necessary filings and releasing its delayed Q3 2007 results by the end
of November but an exact date has yet to be confirmed.
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