Orbital ATK announced on August 10, 2016 that the investors should not rely on the company’s previously issued financial statements due to some accounting irregularities. The irregularity will lead to the reduction of previously disclosed pre tax income by $400-450M and reduction of revenue by $100-150M. All this is associated with one $2.3 billion long term contract with the U.S. Army that the company inherited through its merger with Alliant Techsystems Inc. The contract will become a net loss over the its 10-year term. The problem is attributed to the existence of one or more material weakness in its internal control over financial reporting. The issue will impact the Company’s 2015 fiscal year.
Not one but two audit firms were involved in the 2015 audit of the company. Deloitte & Touche LLP audited till March 2015 and then PricewaterhouseCoopers LLP took over. Neither were able to catch the error!