By Molly Parker
mparker@scbiznews.com
Published Jan. 5, 2009

In the fall, Force Protection caught up with all its reporting duties to the U.S. Securities and Exchange Commission, ending a Nasdaq threat to delist the company. But now, the SEC is asking the Ladson manufacturer to have its 2006 financial statements re-audited.

The SEC request was prompted because the company’s outside accounting firm had its registration revoked two months ago for its failure to follow regulations when auditing several companies’ financial statements, including Force Protection’s.

Force Protection spokesman Tommy Pruitt said the company will seek a waiver from the SEC this week because it believes the books are accurate and does not want to fall behind on its upcoming reporting duties for the 2008 fiscal year.

“Neither management nor our current auditors has any information to suggest that the 2006 audited numbers are inaccurate,” Pruitt said.

The Public Company Accounting Oversight Board, which was created to oversee public companies’ accounting firms in the wake of the Enron scandal, revoked the registration of Colorado-based Jaspers + Hall P.C. on Oct. 21. The firm was registered when it audited Force Protection’s 2004, 2005 and 2006 financials, as well as its restated 2003 financials.

In the report, the board cited several accounting oversights by the company, and, along with yanking the company’s registration, barred its two partners from working for a registered public accounting firm for at least five years.

The report said that the auditing agency “was deficient in several respects” with its audit of Force Protection’s 2006 fiscal year statements. The company failed to perform sufficient procedures to verify the existence of approximately $155 million in cash, which represented 57% of Force Protection’s reported assets, the board claimed.

It also said the auditing firm failed to evaluate whether reported deferred revenue, which represented 22.7% of Force Protection’s total liabilities, was appropriately classified as deferred revenue and was reported in the appropriate period.

In addition, Jaspers + Hall failed to verify the validity of a reported deferred tax benefit representing 67.7% of Force Protection’s net earnings that year. The report states that auditor Patrick Hall “acknowledged that he did not understand the accounting” for the tax benefit.

The audit of Force Protection’s 2003, 2004 and 2005 financial statements also failed to comply with the board’s accounting standards, the report said. But the SEC has requested only that the 2006 financials be re-evaluated.

Still, Force Protection is “disappointed” that the SEC would require the company to re-audit its 2006 report even though the accounting firm was registered with the board that year, Pruitt said.

Further, the SEC notified the company of its position on Dec. 23, which means Force Protection would have to complete the 2006 review at the same time it is trying to wrap up and file its 2008 audited financial statements and 2008 annual report.

“The SEC in other situations has granted waivers, so we are hopeful they will in this case as well,” Pruitt said.

In late 2008, the Nasdaq threatened to delist the company for falling behind on its 2007 year-end report filing, as well as other quarterly reports. The company fell behind as it worked to clean up a host of accounting errors from the prior year. Exacerbating the problem, the company’s accounting firm resigned. Elliott Davis LLC, which was retained by Force Protection after Jaspers + Hall, said “material weaknesses” reported by the company and its lack of internal controls prevented the company from auditing Force Protection and forming an opinion.

The company subsequently hired Grant Thornton LLP as its auditor and caught up with its reporting duties in September. Force Protection was not delisted. Stock was trading at $6.22 at press time.

Reach Molly Parker at 843-849-3144.