PricewaterhouseCoopers (PWC) has resigned as auditor of VTech Holdings over the Hong Kong-listed company's concerns about work the accounting giant carried out on an ill-fated asset acquisition, VTech said last night. VTech, which makes consumer electronic products, said in a press statement it was 'attempting to settle any claims it holds against PricewaterhouseCoopers without proceeding to litigation'. It said it was arranging for the appointment of KPMG as auditor. 'PricewaterhouseCoopers resigned over VTech's concerns about its performance in relation to project work carried out for VTech regarding the company's acquisition of the Lucent wired business in 2000.' The work was carried out by PWC's United States office, a VTech spokeswoman said. A spokesman for PWC's Hong Kong office would not comment. VTech lost US$110.4 million in restructuring and impairment charges after buying the loss-making assets from Lucent. The charges were the main reason for VTech's record US$215 million loss in the year to March 31, 2001. VTech and Lucent reached a US$50 million out-of-court settlement in June last year, and Lucent agreed to reduce by US$50 million the purchase price of the operations it sold to VTech. VTech had sought more than US$170 million in compensation from Lucent in a lawsuit. David Sun Tak-kei, president of Hong Kong Society of Accountants, said the accounting body would not look into the matter. 'This is more a US case than a Hong Kong accounting issue. I don't think it reflects any problem of the local accounting sector,' Mr Sun said. He said the code of ethics for accountants stipulated that an accounting firm should not serve a client if they were in dispute. This would prevent conflict of interest and ensure that accounting firms gave a fair audit. Eric Li Ka-cheung, legislator for accountants, said: 'The auditor has the duty to inform the clients about any risks involved in a merger, but due diligence may not necessarily ensure the clients make a profit from the deal.'
