PCAOB examines Delloitte's audit.. SEC does a boo boo

[<miklosv@andromeda.rutgers.edu>]

July 9, 2005
Deloitte Audit of Navistar Is Investigated
By BLOOMBERG NEWS
Deloitte & Touche, the nation's largest accounting firm, is being
investigated by federal regulators over a 2003 audit of the Navistar
International Corporation, according to a document authorizing the
inquiry.

The Public Company Accounting Oversight Board, in a two-page order issued
in May, said Deloitte's work at Navistar might have failed to comply with
at least five auditing standards. The formal investigation is the first to
emerge aiming at one of the Big Four accounting firms - Deloitte, Ernst &
Young, PricewaterhouseCoopers and KPMG - since the agency was created by
the Sarbanes-Oxley Act of 2002.

"It puts a cloud over the auditing firm's reputation and credibility,"
Paul R. Brown, an accounting professor at the Stern School of Business of
New York University, said when told of the investigation.

Deloitte, which is based in New York, paid $50 million in April to settle
accusations by the Securities and Exchange Commission that its audits
should have detected fraud at the Adelphia Communications Corporation, the
cable television company. It remains the largest penalty the S.E.C. has
levied against an accounting firm.

The S.E.C., which oversees the accounting board, inadvertently disclosed
the investigation of the Navistar audit.

While the document does not explain what Deloitte may have done wrong,
Navistar said in January that its finance unit erred in its accounting for
customer truck loans that were packaged into securities for sale to
investors.

The accounting regulator said in the order that it deemed Deloitte's
actions "if true, to be in possible violation of the act, the rules of the
board, the provisions of the securities laws relating to the preparation
of and issuance of audit reports and the obligations and liabilities of
accountants."

A Deloitte spokeswoman, Deborah Harrington, said, "If there were a
P.C.A.O.B. investigation, it would be confidential."

Michael Shokouhi, a spokesman for the accounting board, said he could not
confirm or deny whether an investigation of Deloitte was under way.

The S.E.C. received a copy of the investigative order from the accounting
board on May 25 and made the document available in its reference room
during the week of June 20. The order was marked "nonpublic," an S.E.C.
spokesman, John Heine, said. "We are taking appropriate steps to improve
procedures."

The investigation of Deloitte concerns its audits of Navistar, which is
based in Warrenville, Ill., and its finance unit for the fiscal year that
ended Oct. 31, 2003.




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