In a letter dated Nov. 17, KPMG confirmed that it had ended its auditor-client relationship with Sonus. Sonus hasn't selected a successor accountant yet, according to its 8-K filing.

According to the filing, KPMG's Nov. 13 report on Sonus' consolidated financial statements for the fiscal years ended July 31, 2000 and 1999, "contained no adverse opinion or disclaimer of opinion."

During a Nov. 16 meeting of Sonus' audit committee, KPMG orally notified committee members of material weaknesses in its internal controls, according to the filing. KPMG told the committee that, as of July 31, 2000, it believed that the firm didn't have "specific policies and procedures in place to adequately estimate the valuation adjustments required on its accounts receivable balances," including the allowance for bad debts, reserve for aged receivables, and payment adjustments on product sales.

KPMG also said that the firm didn't have an adequate system to ensure proper recording of sales returns. In a letter dated Nov. 13, KPMG described the weaknesses and recommended actions including: the development of specific accounting policies and procedures; adding sufficient qualified accounting personnel; timely reconciliation of accounts; and strengthening controls surrounding accounting for sales and returned sales. In its filing, Sonus said it has corrected or is taking steps to correct the matters identified by KPMG.

In March, KPMG had issued a letter in connection with its review of Sonus' financial statements for the quarter ended Jan. 31, 2000. The letter described two internal control weaknesses, considered to be reportable conditions, and recommended timely reconciliation of cash accounts and preparation of an accounts receivable aging report. In June, at the conclusion of the review of Sonus' financial statements for the quarter ended April 30, KPMG orally notified Sonus' audit committee that the reportable conditions noted in the March letter still existed.

In October of 1999, KPMG had issued another letter in connection with its audit of Sonus' consolidated financial statements as of and for the fiscal year ended July 31, 1999. The letter described internal control weaknesses and recommended the timely reconciliation of cash accounts; adding sufficient qualified accounting personnel; strengthening controls surrounding accounting for sales; and development of specific formal accounting policies and procedures.

-- SmartPros News Staff

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