Cambridge Biotech Corp. (CBC) disclosed on Wednesday someinformation relating to the resignation of independent auditors whosuspended their 1993 audit of CBC in March because of their questionsabout certain company transactions.In a letter to shareholders, CBC, of Worcester, Mass., said the Deloitte& Touche auditors questioned four sales transactions totaling about$1.57 million in June, September and December of 1992. The auditorsquestioned whether some of the transactions were instead completed inNovember 1993.Two of the sales, which involved diagnostic products, were to aEuropean company and aggregated about $816,000 in gross revenues.The auditors allege that CBC paid about $52,000 to officers of aEuropean company in exchange for their help in affirming the validityof these revenues.Deloitte & Touche advised CBC that those transactions should bereviewed to determine whether they were made to inflate revenues orto circumvent regulatory requirements.Peter Hartman was chief financial officer of CBC for about three yearsuntil his retirement in the summer of 1993. Jim Bass has been CFOsince Sept. 1, 1993. Hartman, reached at his home in Georgia onWednesday, said it would be inappropriate for him to comment."The two major money issues center around revenue recognition,"Alyson Stone, coordinator of investor relations for CBC, toldBioWorld. "The board [of directors] has given a broader mandate tothe investigators to conduct a comprehensive investigation, and theseissues may not necessarily be the only issues that arise as a result ofthis investigation."It's our goal not just to get this issue behind us, but to resolve theseissues satisfactorily."The company's board of directors hired the firm of Hale & Dorr asspecial counsel to investigate the matter. Hale & Dorr hired accountingfirm Coopers & Lybrand to help."We will be happy to talk about these events once we have thepreliminary results, which will be in about three weeks," Stone said.On April 6, CBC filed with the Securities and Exchange Commission aForm 8-K Report, which is required to disclose certain matterspertaining to the resignation of the auditors.The 8-K also revealed that Deloitte & Touche questioned whethercertain adjustments to receivables, inventories and intangible assetsrecorded in the fourth quarter of 1993 should have been recorded inprior periods. And whether product originally manufactured at CBC'sRockville, Md., facility and returned to Rockville from the company'sIreland facility in the first quarter of 1994 had improperdocumentation, causing such importation to violate U. S. law. n
-- Jim Shrine
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