PPG announced the Securities and Exchange Commission and Department of Justice have ended their investigation into alleged accounting irregularities by the company and will not be issuing a financial or any other penalty.
As PPG previously disclosed, the painting supply company received a report through its internal reporting system in April 2018 alleging violations of its accounting policies and procedures regarding the failure to accrue certain specified expenses in the first quarter of 2018. Based on an initial review at that time, PPG identified approximately $1.4 million of expenses (including legal fees, property taxes, and performance-based compensation) that should have been accrued in the first quarter of 2018 and that were then reflected in PPG’s earnings for the quarter ended March 31, 2018, released April 19, 2018.
The audit committee of PPG’s board of directors, with the assistance of outside counsel and a forensic accountant, oversaw an investigation into these matters. Upon completing its report on June 27, 2018, it authorized the filing of restated financial statements for the fiscal years 2016 and 2017 and certain quarterly periods within those fiscal years in order to correct its previously issued financial statements.
The investigation found evidence the improper accounting entries were made by certain employees at the direction of the company’s former vice president and controller, who was terminated in May 2018. At that time, two employees who acted under his direction were reassigned to different positions within the company, where they don’t have a role in PPG’s internal control over financial reporting, nor its disclosure controls and procedures, the company said at the time.
“In its order, the SEC acknowledged PPG’s self-reporting, its ongoing cooperation throughout the investigation, and its prompt remedial actions,” the company said in a Sept. 26 announcement. PPG further announced the U.S. Attorney’s Office for the Western District of Pennsylvania has informed PPG it also will not pursue any action. PPG had previously reported and disclosed the USAO investigation on Jan. 17, 2019.
The amended annual report on Form 10-K/A for the fiscal year ended Dec. 31, 2017, filed on June 22, 2018, included a restatement of PPG’s audited consolidated financial statements for the years ended Dec. 31, 2016 and 2017. PPG also restated certain unaudited quarterly results related to the three months ended Dec. 31, 2016; March 31, 2017; June 30, 2017; Sept. 30, 2017; and Dec. 31, 2017. In addition, PPG filed its quarterly report on Form 10-Q for the quarter ended March 31, 2018, which made PPG current in its filings with the SEC.