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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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