Audiovox 2003 Annual Report Download - page 141

Item 9 − Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
(a) Previous Principal Independent Accountants and Auditors.
(i) On October 16, 2003, the Board of Directors of Registrant approved a
resolution authorizing the dismissal of KPMG LLP ("KPMG") effective as of the
close of business on that date. The decision of the Board of Directors was based
on the recommendation of the Audit Committee of the Board of Directors. KPMG had
been engaged as the Registrant's principal accountants since 1980.
(ii) The audit reports of KPMG on the Registrant's consolidated financial
statements as of and for the years ended November 30, 2002 and 2001 did not
contain any adverse opinion or a disclaimer of opinion nor were they qualified
or modified as to uncertainty, audit scope, or accounting principles, except for
a modification of accounting principles as their report included a reference to
a footnote which discusses that effective December 1, 2001, the Company adopted
the provisions of Statement of Financial Accounting Standards (Statement) No.
141, " Business Combinations" and Statement No. 142, "Goodwill and Other
Intangible Assets" and a reference to a footnote which discusses that the
consolidated balance sheet as of November 30, 2001 and the related consolidated
statements of operations, stockholders' equity and comprehensive income (loss)
and cash flows for the years ended November 30, 2000 and 2001 were restated.
(iii) In connection with the audits of the two fiscal years ended November
30, 2002 and 2001, and the subsequent interim periods preceding the date of
determination of termination of the engagement of KPMG, the Registrant was not
in disagreement with KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of KPMG, would have caused
KPMG to make reference to the subject matter of the disagreement in connection
with their reports.
(iv) In connection with the audits of the two fiscal years ended November
30, 2002 and 2001, and the subsequent interim periods preceding the date of
determination of termination of the engagement of KPMG, there were no
"reportable events" except that KPMG reported to the Registrant's Audit
Committee that KPMG considered two matters involving internal controls and their
operation to be material weaknesses. Specifically, in connection with its audit
of the consolidated financial statements of Registrant and its subsidiaries for
the fiscal year ended November 30, 2002, KPMG reported that a material weakness
existed related to the technical competence of the Registrant's accounting
personnel and recommended significantly enhancing the accounting staff. The
Registrant is addressing this concern and is in the process of enhancing its
accounting staff. Additionally, KPMG reported that it considered a deficiency in
internal controls over sales incentives arrangements with its customers to be a
material weakness. Included in KPMG's recommendations in this area was a
standardized approach to the documentation of sales incentive arrangements, both
internally and externally. A similar issue, relative to the Registrant's
Wireless segment, was also reported to the Audit Committee of Registrant by KPMG
in March 2002. The Registrant began implementing KPMG's recommendations for its
Wireless and Electronics segments in November 2002 and May 2003, respectively.
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