PricewaterhouseCoopers (PwC) has resigned as auditor of Playmates Holdings after a disagreement over the toymaker's handling of accounting misconduct.
Playmates said PwC's resignation letter stated that a senior officer of Playmates Toys, a principal subsidiary incorporated in California, 'admitted misconduct in respect of certain accounting matters' in the 2004 financial year.
The misconduct related to over-provisioning for potential customer claims of mark-down allowances due to unsold goods and incorrect recognition of revenue on sales of goods on freight prepaid terms.
Playmates' stock tumbled yesterday in heavy trading of 67.2 million shares. It closed at $1.01, down 9.82 per cent from Friday's close.
The company said it had launched an independent investigation after PwC's revelation and a probe by its audit committee found an 'accounting oversight' which would have an insignificant effect on the finances of the company. The net impact on revenue last year arising from the oversight is a decrease of about US$411,000.
Playmates reported net profit of $94.81 million for the first half to June, a 171.8 per cent increase over the same period last year.