More Cinar woes
Animation producer sees auditors resign
Ernst & Young decided it couldn't sign off on Cinar's books because Cinar management said it would be unable to verify whether the company's statements contain evidence of illegal and fraudulent acts and/or suspicious related-party transactions.
Cinar management also said Friday that efforts to sell the company are advancing and that the company has authorized financial adviser Merrill Lynch "to approach parties who may have an interest in consummating a transaction involving Cinar, including a number of parties who have already expressed such an interest."
Troubled history
Montreal-based Cinar has been plagued by allegations of tax fraud and other improper activities since fall 1999, when it was alleged in the House of Commons that Cinar improperly accessed millions of dollars of federal and provincial tax credits.
For the past year, Cinar management and Ernst & Young have been attempting to provide financial results for 1999 and revised financial results for the two prior years.
Partly as a result of the lack of audited financial statements, Cinar's shares have been delisted from the Nasdaq exchange and trading has been halted on the shares on the Toronto Stock Exchange.
Unaudited statements
Cinar management said Friday that it will provide unaudited financial statements for the year ended Nov. 30, 1999, and the six-month period ended May 31, 2000, and it will provide unaudited revised financial statements for the years 1997 and 1998. Company expects to release this information this week.
Ernst & Young resigned when Cinar told its independent auditors that it would not be able to verify the accuracy of the financial statements until, at the earliest, the end of fiscal 2001.
"In order to be audited, the financial statements of the company must be the subject of representations from management related to certain matters, including whether any illegal, fraudulent acts or related party transactions exist and, if so, have been adequately reflected," said the Cinar statement.
"New management of the company has determined that, at the present time, it cannot provide the required assurances with respect to the financial periods prior to its appointment," it said.
Cinar settled with federal and provincial tax authorities last month, agreeing to pay back millions of dollars for improperly gained tax credits and to pay millions in fines.
Company is still the subject of an investigation by the Royal Canadian Mounted Police.
