Ernst & Whinney Quits as Auditor of ZZZZ Best Co.

ZZZZ Best Co., the Reseda carpet cleaning firm headed by 21-year-old entrepreneur Barry Minkow, said Wednesday that Ernst & Whinney has resigned as the company’s independent auditor and will be succeeded by Price Waterhouse.

William Carter, vice chairman of Ernst & Whinney in Los Angeles, would not disclose why his firm parted company with ZZZZ Best.

Minkow, ZZZZ Best’s chairman and founder, said in a statement that there was no disagreement “on any matter of accounting principles, financial statement disclosure, or auditing scope or procedure.”

Minkow’s statement said ZZZZ Best “believes that Ernst & Whinney resigned because of certain newspaper articles which appeared several weeks ago.”

Last month, The Times reported that ZZZZ Best had rung up $72,000 in false credit card charges from November, 1984, to March, 1985. ZZZZ Best laid the blame on 12 carpet subcontractors, and it said that they had been fired and the money repaid. Since the story appeared, the company’s stock has fallen from $15.375 per share in over-the-counter trading to Wednesday’s closing price of $7, up 12.5 cents for the day.

Wednesday’s announcement was made after the stock markets closed.

On May 28, ZZZZ Best announced preliminary, unaudited financial results for its latest fiscal year ended April 30. Minkow said that ZZZZ Best posted in excess of $5 million in net income, or 50 cents per share, on at least $50 million in revenue. At the time Minkow said, “We expect to have our certified fiscal 1987 audit completed by our independent auditors within the next three to four weeks as scheduled.”

Public companies have 90 days after the close of their fiscal year to file audited results with the SEC. Daniel Lyle, a Price Waterhouse partner in Los Angeles now in charge of the ZZZZ Best account, said: “We really haven’t looked at their books yet.” Asked what the chances were of making the 90-day filing deadline, he said, “If everything goes well, it will be met easily.”

In ZZZZ Best’s prior fiscal year ended April 30, 1986, the company reported net income of $945,645, or 12 cents a share, on $4.8 million in revenue. That year’s audit was conducted by Greenspan & Co., an Englewood Cliffs, N.J. accounting firm. Later in the year, when ZZZZ Best was preparing a public stock offering, it hired Ernst & Whinney.