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H&R Block Flubs Taxes

Auditors say its accounting resources fall short.

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H&R Block

(HRB) - Get H&R Block, Inc. Report


In a regulatory filing, the tax adviser disclosed that its auditor found a "material weakness'' in the firm's accounting for income taxes. H&R Block said auditors at KPMG found that the firm devoted insufficient resources in its corporate tax department to "accurately identify, evaluate and report'' complex transactions.

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The material weakness was discovered during a standard auditing review that is required under the Sarbanes-Oxley corporate governance reform measure.

The tax woes weren't the only problem KPMG uncovered at H&R Block.

The Kansas City firm also announced a much larger-than-expected restatement of it earnings for 2003 and 2004. The firm reported that it overstated net income for the past two years by $91 million, or 50 cents a share. In June, H&R Block had predicted a much smaller restatement of just 2 cents a share.

The company blamed much of the restatement on accounting errors, stemming from its 1991 acquisition of Olde Financial.

In early trading, share of H&R Block were up 72 cents, or 1.7%, to $57.32.