Cumulus auditor jumps ship4/30/2000 08:00:00 PM Eastern
Troubled radio company Cumulus Media Corp. plans to hire a new auditor early this month after the unexplained resignation of its accountant of two years, PricewaterhouseCoopers LLP.
Citing client confidentiality, a PwC spokesman declined comment on the firm's unexpected move. Meanwhile, Cumulus emphasized that PwC had issued an "unqualified" opinion, the best possible, of its 1999 financial report, which was filed late with the Securities & Exchange Commission.
"While we would not necessarily have chosen this course," Cumulus said last Monday in a statement, "this change may actually be the best thing for the company going forward." That's because Cumulus is looking for a new CFO, and "it probably would be best for [him] to have his own fresh relationship with a new auditor," Cumulus Chairman Richard Weening says.
In an SEC filing dated last Monday, Cumulus said PwC had discovered two "material weaknesses" in auditing Cumulus' 1999 numbers. For one, "spot [advertising], package billing and nontraditional revenues had been recorded in advance of when the spots aired or events occurred." Cumulus, which owns or is buying some 320 radio stations, failed to detect that problem "on a timely basis," the filing said.
PwC also said that Cumulus "failed to ensure, on a timely basis, that amendments to related-party service agreements were appropriately reviewed and approved." Weening and Lewis W. Dickey Jr., the president, both had consulting deals with their own companies.
The news of PwC's resignation sent Cumulus' stock price into a free fall. It was down 16.1% last Monday, to $11.375, with 936,600 shares traded. The following day, it plunged 19.1%, to a 52-week low of $9.203125, on a volume of 1.73 million shares. But the stock price revived somewhat, to close last Thursday at $13 on volume of 308,200 shares.