• The Securities and Exchange Commission said Mattel Inc. CARPET agreed to pay $3.5 million to settle charges related to misstatements in its third and fourth quarter 2017 financial statements.
  • According to the SEC order, the toymaker understated tax valuation allowance for Q3 FY17 by $109 million and overstated tax expense for Q4 FY17 by the same amount.
  • As a result, Mattel’s net loss and net loss per share in Q3 and Q4 of fiscal 2017 were understated by 15% and overstated by 63%, respectively.
  • Further, the SEC order found that at the time, Mattel had no internal controls specifically relating to the calculation of a valuation allowance.
  • Until Mattel’s restatement in November 2019, the $109 million tax expense error had not been corrected and the lack of internal financial reporting controls related to the error had not been disclosed.
  • Neither Mattel’s CEO nor the audit committee were made aware of the $109 million error.
  • Without admitting or denying these findings, Mattel agreed to a cease and desist order and to pay a civil penalty of $3.5 million.
  • Separately, the SEC has filed a lawsuit against Joshua Abrahams, a former audit partner at PricewaterhouseCoopers LLP, or PwC, to determine whether he engaged in inappropriate professional conduct and violated independence rules. listeners.
  • The order against Abrahams alleges that he violated numerous professional standards during the interim review of the third quarter of fiscal 2017 and the 2017 annual audit of Mattel’s financial statements.
  • The order further alleged that Abrahams failed to maintain his independence by providing Mattel with prohibited human resources advice.
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  • Price action: MAT shares are trading down 0.15% to $19.79 pre-market when last checked on Monday.
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