Why Did Computer Associates Change Auditors?

Also, another Lernahooligan alert.
Publish date:

There wasn't a press release, and maybe it's not a big deal, but: On Friday, Computer Associates (CA) - Get Report disclosed, in a Securities and Exchange Commission filing, that it had booted its longtime auditor, Ernst & Young, in favor of KPMG. (Nothing like disclosing it on a day half the world is on vacation!)

According to the filing and Computer Associates spokesman Doug Robinson, there were no accounting issues or disputes. "We look at this like any other vendor change," Robinson says. "We were impressed with KPMG. They gave us a nice proposal and we decided to go with them."

However, it's always a red flag whenever a longtime auditor is canned, especially one that has been with a company for as long as Ernst has been with CA. (More than 10 years.) It's even more of an eye-opener at a company like CA, which has been under fire from critics for what seems like years for unusually high receivables. At the end of the last fiscal year, ending March 31, CA's receivables days outstanding topped 140 days.

A sign of trouble? Robinson says no. He says that unlike most software companies, CA not only sells its software, it acts as the bank to finance the software. That, in turn, leads to the high receivables. In fact, he adds, nonfinance-related (trade) receivables are closer to 90 days, which is in line with industry standards.

Perhaps, but with the shift in auditors, don't be surprised if short-sellers, who gave up on CA long ago, use the change as a reason to take another look.

  • Lernahooligan alert: Still haven't heard back from Lernout & Hauspie (LHSP) , the voice-recognition company, on whether its senior vice president of finance and strategic planning, Tom Doherty, has left the company. Doherty was the company's key contact with Wall Street. A call to his office in Burlington, Mass., Tuesday afternoon was greeted by the same voice mail, mentioned here Thursday, saying he was on vacation and would return today.

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback. Greenberg also writes a monthly column for Fortune.