Cendant Corp.'s former accounting firm, Ernst & Young, said it appears it was intentionally deceived when it performed the audit of the direct marketer and franchiser's CUC International unit.
Cendant said last week that it will restate earnings for 1997 by as much as $250 million, or 28 cents a share, because of accounting fraud at the discount shopping club unit, including the booking of fictitious revenue.
Ernst & Young has vouched for the accuracy of the audit since Cendant, which also owns such brands as Avis car rentals and Century 21 real estate brokers, first admitted on April 15 that it uncovered accounting irregularities.
"It appears that efforts may have been taken to deceive the auditors," Ernst & Young said in a statement. "The best planned and performed audit may not detect material misstatements if there is intentional, collusive fraud by a company's financial management."