Wal-Mart Stores, Inc. and Subsidiaries - Page 27

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          statements.  Petitioners' financial statements were certified by            
          E&Y as conforming to GAAP without qualification.                            
                Respondent challenges the accuracy of petitioners'                    
          financial statements and contends that E&Y's certification does             
          not pertain to the estimates of shrinkage.  We disagree.  Each of           
          the statements is accompanied by E&Y's unqualified certification            
          that E&Y has examined the financial statements in accordance with           
          generally accepted auditing principles, and that the statements             
          present the financial position of petitioners in conformance with           
          GAAP.  Respondent invites the Court to focus on the accounting              
          concept of materiality and conclude that E&Y was able to render             
          an unqualified opinion even though petitioners' estimates of                
          inventory shrinkage were improper.  We will not do so.  We do not           
          find that petitioners' inventory accounting method was out of               
          compliance with GAAP.  Petitioners' witness James A. Walker, Jr.,           
          a C.P.A. and Wal-Mart's current senior vice                                 
          president/comptroller, testified that Wal-Mart's method of                  
          accounting for shrinkage conformed with GAAP.  Respondent did not           
          persuasively challenge Mr. Walker's testimony, and we find that             
          his testimony was consistent with the testimony of                          
          Robert Lundgren.  Mr. Lundgren is also a C.P.A, and he is the               
          partner of E&Y who directed the audit of Wal-.Mart for the                  
          relevant years and gave the approval for the firm's opinion on              
          the financial statements.  To the extent that Dr. Wheeler                   






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