Clubmarket Auditors Refuse to Sign Reports

Kost Forer Gabbay and Kasierer, part of the Ernst & Young international accountants firm, refused to sign Clubmarket's financial statements for 2004, Haaretz has learned.

When the troubled supermarket chain filed for protection from its creditors last week, it included in its request its financial statements only for the third quarter of 2004. In other words, its most up-to-date financial reports are current only through the end of September 2004. Most Israeli companies have already filed their financial statements for the first quarter of the current year, and this week, some will release their second quarter reports.

In its request to the Tel Aviv District Court Tuesday, Clubmarket included only partial details of its financial situation in the fourth quarter of last year and the first quarter of 2005. Based only on these figures, it is difficult to draw up an accurate picture of the troubled chain.

Clubmarket was finally forced to seek court protection from bankruptcy last week, after accruing debts of some NIS 1.4 billion, most of which is owed to suppliers, plus some NIS 500 million to the banks. Judge Varda Alshech made clear in her initial response to the request in which she granted temporary protection only until August 17 that unless the Clubmarket owners are prepared to put up large sums of their own money, she would not be inclined to provide protection. In other words, the company would be allowed to collapse.

Clubmarket is owned by the Mozes-Borovich-Rosen group.

The company trustee, CPA Gabriel Trebelsi, said that in the meantime he is working with the partial financial statements for 2004. He explained that Clubmarket's accountants had not signed the latest statements due to an "accounting argument" between the company and its auditors.

Auditor Kost Forer Gabbay said it does not comment on client details. One common argument between auditors and companies in financial straits, such as Clubmarket, is the inclusion of a "going concern" warning in the company accounts, though as Clubmarket has had such a note in its accounts for some time, this is not considered to be the source of the latest dispute over signing the accounts.