H&R Block Flubs Taxes

Auditors say its accounting resources fall short.
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H&R Block

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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.

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.