Mattel Agrees To Pay $3.5 Mln To SEC To Settle Financial Misstatement Charges

(RTTNews) - Mattel (MAT) has agreed to pay $3.5 million to the Securities and Exchange Commission to settle charges relating to misstatements in its third and fourth quarter 2017 financial statements.

Separately, the SEC said it is initiating litigation against Joshua Abrahams, a former audit partner at PricewaterhouseCoopers LLP to determine whether he engaged in improper professional conduct and violated auditor independence rules.

According to the SEC's order, Mattel understated the tax-related valuation allowance for the third quarter of 2017 by $109 million and overstated the tax expense for the fourth quarter of 2017 by the same amount. As a result, Mattel's third quarter and fourth quarter 2017 net loss and net loss per share were understated by 15% and overstated by 63%, respectively.

"An auditor's adherence to professional standards and independence is critical to preserving investors' trust in a company's financial statements," said Alka N. Patel, Associate Director of the Los Angeles Regional Office. "Auditors who advise their clients on who to hire will have an interest in the success of such hires and could therefore be less critical of their effectiveness, all of which undermines the auditor's independence."