Groupon Revisions Highlight New Model’s Risks.docx - Groupon Revisions Highlight New Model’s Risks By Douglas MacMillan Apr 2 2012 Groupon

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Groupon Revisions Highlight New Model’s Risks By Douglas MacMillan - Apr 2, 2012 Groupon Inc. (GRPN) ’s latest restatement, following accounting missteps last year, heightens concern about the reliability of the company’s financial reporting and raises questions whether auditors gave enough oversight to the coupon provider’s novel business model. The Chicago-based company reported a “material weakness” in financial controls on March 30 and said fourth-quarter sales were lower than previously stated because of higher refunds to merchants. That cut revenue in the period -- Groupon’s first as a public company -- by $14.3 million to $492.2 million. The announcement added to setbacks for Groupon, which has struggled to get its financial statements in order since filing for an initial public offering in June. The company abandoned an accounting method for operating income after a review by regulators and later restated 2010 results. The moves raise questions about why Groupon’s auditor, Ernst & Young LLP, didn’t point out concerns sooner, said Herman Leung , an analyst at Susquehanna Financial Group in San Francisco . “This should have been highlighted by the auditors,” said Leung, who has a neutral rating on shares of Groupon and doesn’t own the stock. “The business is growing so fast that it
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