The U.S. Department of Justice (DOJ) has begun an investigation into AOL Time Warner Inc.'s (AOLTW) accounting practices, the company confirmed Wednesday, joining the U.S. Securities and Exchange Commission (SEC) in its recently announced probe.
The DOJ inquiry comes just one week after AOLTW Chief Executive Officer Richard Parsons revealed that the SEC had initiated a "fact finding" inquiry into AOLTW's accounting practices. In a statement released Wednesday, AOLTW said that it is cooperating 100 percent with the SEC and will cooperate with the DOJ as well.
"Most importantly, as we have consistently said, our accounting is appropriate and in accordance with Generally Accepted Accounting Principles (GAAP), and our outside auditor Ernst & Young has repeatedly confirmed that, " AOLTW said.
AOLTW's financial practices have been in question since the Washington Post ran a series of articles earlier this month saying that the Internet and media giant shifted revenues from one division to another in an effort to prop up its flailing AOL Internet unit. The accusations come at a particularly bad time for the company, which is currently busy trying to shake off a dramatic stock slump and an executive reshuffling. What's more, a series of high-profile corporate accounting scandals is putting the squeeze on companies to assure financial transparency. Adding to the pressure, U.S. President George W. Bush signed a law Tuesday placing greater penalties on companies that cook the books.
"In the current environment, when anyone raises a question about accounting, it's not surprising that the relevant government agencies will want to look into the facts," AOLTW's statement said.
The company's stock (AOL) fell 7.26 percent to US$11.50 a share in trading late Wednesday morning.
A DOJ spokesman refused to comment Wednesday.