Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
So what: Ebix is accused of overstating fourth-quarter 2009 net income by 1.7%. Ebix acknowledges an overstatement but claims it was only three-fourths of the alleged size and was corrected when it was discovered in 2010.
Now what: The accusers sued Ebix after the company refused to pay them a performance-based incentive, so their motives have a self-serving element. That said, they claim, "Ebix does not have sufficient internal accounting controls to allow their books and records to be relied on." The accusations raise questions about all of the company's reported earnings. Short interest in the stock was already noteworthy and indicated "investors question the legitimacy of the company's reported results," according to Lynn Turner, former chief accountant of the Securities and Exchange Commission. With accusations flying on both sides, it's likely there will be more negative news before the truth is out.
Interested in more info on Ebix? Add it to your watchlist by clicking here.
Fool contributor Cindy Johnson does not own shares of any company named above. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.