Fraud at Philips Mexico Arises After KPMG Financial Accounting

Michelle Remo, “Big 4″ observer
May 26, 2011 /

Following allegations of bribery at its healthcare equipment sales in Poland, electronics company Philips has said it is investigating a possible accounting error at its Mexican subsidiary.

Earlier this month, three employees of Philips have been tried in the western city of Poznan for charges of corruption relating to the sale of its healthcare equipment.

The three were charged of bribing 16 hospitals with hundreds of millions of zlotys (euros, dollars) to obtain tenders for Philips.

KPMG’s financial accounting alleged that the figures in Philips’s annual report for the 2008/09 fiscal year have been “manipulated” and claimed the error may force the electronics company to restate its 2009 results.

Citing confidential documents from KPMG, Dutch newspaper Eindhovens Dagblad reported that Philips Mexico’s medical equipment division engaged in a fraudulent transaction that resulted in the accounting error.

Philips spokesman Steve Klink announced that the firm has already opened an inquiry into its books. Klink said the electronics company seriously adheres to accounting and ethical rules.

Had the company spotted the fraud it would have reported it to police authorities, Klink added. But Philips failed to do so.

Klink did not mention the amount the Mexican subsidiary contributed to Philips’s annual turnover.

But the electronics company added that the error is not likely to affect its 2009 report since Mexico was excluded from the countries where it recorded its sales.

Philips only reported the figures for its business units in certain regions, including its health care sales in North America that reached $5.48 billion last year.

With around 117,000 employees around the world, Philips has been manufacturing medical equipment for the past 12 years from specializing only in the production of TVs and household appliances.

In Botswana, Philips is set to provide the government with its first MRI scanner this year, which will enhance the medical diagnostic capacity in terms of efficiency and precision at the Nyangagbwe Referral hospital in Francistown.

 

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