EXHIBIT 16.1
[LETTERHEAD OF DELOITTE & TOUCHE APPEARS HERE]
December 22, 1999
Securities and Exchange Commission
Mail Stop 11-3
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We have read the statements of Gencor Industries, Inc. (the "Registrant")
included in Item 4 of its Form 8-K dated December 3, 1999, and our comments are
set forth below. For each sentence in Item 4 of the Registrant's Form 8-K dated
December 3, 1999, as previously submitted by the Registrant, we have repeated
such sentence and included our response thereto.
1/ST/ PARAGRAPH
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1. Subsequent to the issuance of the Registrant's consolidated financial
statements as of and for the year-ended September 30, 1998, and as
publicly announced on January 28, 1999, management of the Registrant
discovered that certain accounting irregularities and other improprieties
may have occurred at its United Kingdom subsidiary, Gencor ACP, Ltd.
("ACP").
We agree with the Registrant's statement, but would add that Deloitte &
Touche in the United Kingdom ("DTUK") also identified certain information
that contributed to the discovery that certain accounting irregularities
and other improprieties may have occurred at the Registrant's United
Kingdom subsidiary, Gencor ACP, Ltd. ("ACP").
2. At the direction of the Registrant's Board of Directors and Audit
Committee, immediate inquiry was made into the financial affairs of ACP.
We agree with the Registrant's statement, except that we are not in a
position to agree or disagree with the characterization of the inquiry
into the financial affairs of ACP as being immediate or at the direction
of the Registrant's Board of Directors and Audit Committee. On February 4,
1999, we discussed with the Registrant's Audit Committee the need for the
Registrant to conduct an independent investigation into the accounting
irregularities and other improprieties at ACP.
3. This quickly develops into a full investigation which over its course
confirmed accounting irregularities and other improprieties by ACP's
Managing Director and its Chief Financial Officer, both of whom were
immediately terminated and replaced.
We agree with the Registrant's statement, except that we are not in a
position to agree or disagree with the appropriateness of the subjective
terms "quickly", "full" and "immediately".
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4. The Registrant then directed that its certified public accountants,
Deloitte & Touche LLP, take all steps necessary to enable the Registrant
to complete a re-audit in the U.K. so that the Registrant would be in a
position to file its restated 1998 consolidated financial statements, and
further be in a position to file its quarterly statements for the fiscal
year 1999 at the earliest possible date.
We disagree with the Registrant's statement to the extent it implies that
the Registrant was to complete a "re-audit" in the U.K. Deloitte & Touche
LLP("D&T") and DTUK were requested by the Registrant to perform the
auditing procedures necessary for D&T to issue its report on the
Registrant's restated consolidated financial statements as of and for the
year ended September 30, 1998. We are not in a position to agree or
disagree with the remaining portions of the statement made by the
Registrant.
2/ND/PARAGRAPH
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1. The Registrant and Deloitte & Touche LLP diligently worked on revising the
Registrant's consolidated financial statements as of and for the year-ended
September 30, 1998.
We disagree with the Registrant's statement to the extent it implies that
D&T was responsible for revising the Registrant's consolidated financial
statements as of and for the year ended September 30, 1998. The
Registrant's management is responsible for restating the Registrant's
consolidated financial statements as of and for the year ended September
30, 1998. D&T and DTUK were requested by the Registrant to perform the
auditing procedures necessary for D&T to issue its report on the
Registrant's restated consolidated financial statements as of and for the
year ended September 30, 1998.
2. By the end of January 1999 the Registrant anticipated that it would be able
to disclose its revised financial statements as of and for the year-ended
September 30, 1998, to the public within a short period of time thereafter.
We are not in a position to agree or disagree with the Registrant's
statement regarding what the Registrant anticipated at the end of January
1999. However, on February 4, 1999, we advised the Registrant that it
needed to complete its investigation related to ACP before we would
consider whether we would issue our report on the Registrant's restated
consolidated financial statements as of and for the year ended September
30, 1998.
3. The Registrant received a letter from Deloitte & Touche LLP on February 1,
1999, to the effect that their report dated November 3, 1998, should no
longer be relied upon or associated with the Registrant's consolidated
financial statements as of and for the year-ended September 30, 1998.
We agree with the Registrant's statement and add that from January 22,
1999 to February 1, 1999, we repeatedly informed the Registrant that our
report on the Registrant's consolidated financial statements as of and for
the year ended September 30, 1998, should no longer be relied upon, and
repeatedly requested that the Registrant include a statement to that effect
in a company press release.
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3RD PARAGRAPH
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1. In April 1999, Registrant and Deloitte & Touche LLP had completed the
re-audit.
We disagree with the Registrant's statement to the extent that it implies
that the Registrant performed a re-audit. We also disagree because we did
not complete all auditing procedures necessary to issue our report on the
Registrant's restated consolidated financial statements as of and for the
year ended September 30, 1998.
2. However, during the process of the re-audit, the Registrant learned that
Deloitte & Touche LLP's affiliate in the U.K. ("Deloitte UK") was not in
compliance with US accounting rules regarding accounting independence
because Deloitte UK had charged ACP a fee in connection with rendering
certain executive recruiting services.
We disagree with the Registrant's statement. DTUK is a member firm
Deloitte Touche Tohmatsu. D&T informed the Registrant that the Staff of the
Securities and Exchange Commission (the "SEC Staff") may raise questions
regarding the independence of D&T or DTUK with respect to the Registrant,
because DTUK accepted an engagement to perform and did perform certain
executive recruiting services for ACP and that the matter should be
discussed with the SEC Staff to determine their position with respect to
D&T's independence.
3. The Registrant, its counsel and Deloitte & Touche LLP met with the
Securities and Exchange Commission (the "SEC") to discuss the matter in
June of 1999.
We agree with the Registrant's statement, except that the meeting was with
members of the Staff of the Securities and Exchange Commission.
4. From that time on, this issue became a protracted matter between the SEC
and Deloitte & Touche LLP.
We disagree with the Registrant's statement to the extent it implies that
this matter was only between D&T and the SEC Staff, because the Registrant
was also a party to this matter given that its financial statements were at
issue. We are not in a position to agree or disagree with the Registrant's
statement to the extent that it characterizes this matter as being
protracted.
5. Gencor could only wait on the sidelines for a resolution of the matter, or
directions from the SEC on how to proceed so as to hasten the day when the
Registrant could file financials and resume the trading of its stock.
We are not in a position to agree or disagree with the Registrant's
statement.
6. The Registrant regularly pursued the SEC to learn of the disposition of the
independence matter.
We are not in a position to agree or disagree with the Registrant's
statement.
7. However, with no ruling having been rendered, in September 1999, the
Registrant on its own initiative undertook to have the ACP operation re-
audited for the second time by a new, wholly-independent accounting firm,
Grant Thornton, LLP.
We agree that the Registrant engaged Grant Thornton to audit the financial
statements of ACP as of and for the year ended September 30, 1998. We
disagree with the Registrant's
statement to the extent that it characterizes the engaging of Grant Thornton as
being "on its own initiative". On June 29, 1999, we advised the Registrant that
it should engage another auditor to re-audit the 1998 financial statements of
ACP because doing so may resolve the independence issue being discussed with the
SEC Staff. We are not in a position to agree or disagree with the remaining
portions of the statement made by the Registrant.
4/TH/ PARAGRAPH
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1. The Registrant had presumed that this second re-audit would alleviate any
possible problems that the SEC had with the Deloitte UK audit.
We are not in a position to agree or disagree with what the Registrant may
have presumed.
2. Although the Grant Thornton, LLP re-audit was to be a costly, and
time-consuming process, it was believed to be the prudent thing to do in
order to overcome the SEC/Deloitte & Touche LLP stalemate.
We are not in a position to agree or disagree with the Registrant's
statement to the extent that it characterizes the audit by Grant Thornton
as being a costly and time-consuming process, or as to what the Registrant
believed to be prudent. We disagree with the Registrant's statement to the
extent that it characterizes this matter as a SEC/D&T stalemate, because
the Registrant was also a party to this matter given that its financial
statements were at issue. We also point out that the Registrant, the SEC
Staff and D&T were continuing to discuss possible resolutions in order to
resolve the independence questions, prior to our termination.
3. At no time was the Registrant alerted that the SEC might disqualify
Deloitte & Touche LLP also as the consolidating global auditor for all of
the Registrant worldwide.
We disagree with the Registrant's statement because on June 29, 1999, in a
meeting with the Registrant and D&T, the SEC Staff stated that they were
questioning D&T's independence with respect to the Registrant's
consolidated financial statements.
4. Unfortunately on November 18, 1999, the SEC finally responded to the
Registrant advising that it had determined that Deloitte & Touche LLP was
not independent on a global basis, thus requiring the Registrant to retain
the services of another audit firm to re-audit all of the Registrant's
worldwide operations, not just ACP in England, for the year 1998.
We disagree with the Registrant's statement that the SEC Staff had
determined that D&T was not independent with respect to the Registrant on a
global basis. We received a copy of a letter from the SEC Staff to the
Registrant, dated November 18, 1999, stating that the SEC Staff "...can
give you no comfort regarding the independence of your auditors, Deloitte &
Touche LLP." We do not interpret such statement as being a determination by
the SEC Staff that D&T was not independent with respect to the Registrant
on a global basis. Rather, we believe that it is indicative of a position
that the issue had not yet been resolved to the SEC Staff's satisfaction.
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5/TH/ PARAGRAPH
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1. Because of this ruling by the SEC, the Registrant has made the decision to
terminate Deloitte & Touche LLP and informed Deloitte & Touche LLP of this
fact on December 3, 1999.
We agree with the Registrant's statement that we were informed that we had
been terminated as the Registrant's independent auditor on December 3,
1999. We disagree with the Registrant's statement that there was a ruling
by the SEC Staff. We are not in a position to agree or disagree with
respect to the reason the Registrant made the decision to terminate D&T.
6/TH/ PARAGRAPH
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1. Deloitte & Touche LLP'S report on the Registrant's financial statements for
each of the last two fiscal years, prior to their withdrawal, did not
contain an adverse opinion or disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting principles.
We agree with the Registrant's statement, with the clarification that our
report dated November 3, 1998, on the Registrant's consolidated financial
statements as of and for the year ended September 30, 1998, was withdrawn
on February 1, 1999.
2. The decision to change accountants was approved by the Board of Directors.
We are not in a position to agree or disagree with the Registrant's
statement.
3. During the Registrant's two most recent fiscal years and in the period
since September 30, 1998, there were no disagreements with Deliotte &
Touche LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which disagreements, if
not resolved to the satisfaction of Deliotte & Touche LLP, would have
caused it to make reference to the subject matter of the disagreements in
connection with its report.
We agree with the Registrant's statement.
7/TH/ PARAGRAPH
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1. The Registrant is in the process of selecting a new nationally-known
independent certified public accountant and at the present expects to have
its worldwide re-audit completed in the Spring of 2000.
We are not in a position to agree or disagree with the Registrant's
statement.
8/TH/ PARAGRAPH
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1. Information contained in this Report, other than historical information,
may be considered forward-looking in nature.
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We are not in a position to agree or disagree with the Registrant's
statement.
2. As such, it is based upon certain assumptions and is subject to various risks
and uncertainties, which may not be controllable by the Registrant.
We are not in a position to agree or disagree with the Registrant's
statement.
3. Some of these assumptions, which relate to the re-audit, will be that (i) the
Registrant is able to timely select new auditors, and (ii) there will be no
delays in the conduct of the re-audit.
We are not in a position to agree or disagree with the Registrant's
statement.
4. To the extent that these assumptions prove to be incorrect, or should any of
these risks or uncertainties materialize, the actual results may vary
materially from those which were anticipated.
We are not in a position to agree or disagree with the Registrant's
statement.
Very truly yours,
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
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