(Crain's) — The Securities and Exchange Commission has launched an informal inquiry into Groupon Inc.'s accounting issues that caused it to restate fourth-quarter results.
The SEC's probe is preliminary, the Wall Street Journal reports.
Groupon said the revision, which reduced fourth-quarter earnings and revenue, was caused by the need for higher reserves for refunds on deals that have higher price tags, such as Lasik eye surgery and laser hair removal.
The company didn't provide additional details on how much the total refunds were compared with its reserves at the time.
The Wall Street Journal reported that a high number of refunds began showing up in January and were disclosed to top management by the company's chief accounting officer in February.
The company 's auditors, Ernst & Young LLP, said it found Groupon had a material weakness in its internal accounting and financial controls.
The revelations are causing big problems for Groupon, which earned a reputation for aggressive accounting after a lengthy battle with the SEC during its IPO preparation that caused it to revise financial results before going public. It also brought criticism of Chief Financial Officer Jason Child.
Its stock has fallen 16 percent since Friday and is trading near its lowest point.
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