Two of the world’s top accounting firms helped conduct due diligence last year for Caterpillar’s $886m acquisition of ERA, the Chinese mining equipment maker that was later alleged to have accounting irregularities.
Deloitte and Ernst & Young conducted due diligence for the transaction, according to two people close to the deal. Deloitte audited the working capital for ERA, while Ernst & Young conducted overall due diligence, one of these people said.
Caterpillar said last week it had discovered accounting irregularities at ERA, prompting it to take a goodwill impairment charge of $580m – more than half the value of the acquisition. The US machinery maker said it had found “deliberate, multiyear co-ordinated accounting misconduct” at ERA that was designed to make the company appear more profitable ahead of the acquisition.