Finally, the comScore Audit Report

After more than six months, comScore's investigation into 'certain accounting matters' has concluded that its last three years' financial statements 'should no longer be relied upon', due to the erroneous inclusion of non-monetary transactions which inflated revenue and other figures.

The firm revealed in March that the previous month the Audit Committee of its Board of Directors had received a 'message regarding certain potential accounting matters'. The committee began an investigation assisted by independent counsel King & Spalding LLP and forensic accountants AlixPartners, LLP. The review focused on 'nonmonetary transactions' - relating to the exchange of data with other companies - which had been included in accounts figures, and the auditors concluded this was an 'error of judgement' compounded by 'internal control deficiencies'.

As a result of these errors, the Committee concluded that the company's consolidated financial statements for years ended December 31st, 2014 and 2013 should no longer be relied upon - as well as quarterly and annual statements for 2015.

comScore intends to 'reverse' revenue and expenses associated with all nonmonetary transactions during the periods in question, and account for them 'at historical cost rather than at fair value'. It explains: 'There is no historical cost basis associated with the assets that the Company exchanged and therefore there should be no revenue recognized or expenses incurred for those transactions' - a fact previously flagged up by commentators including the Wall Street Journal.

According to its filing at www.sec.gov/Archives/edgar/data/1158172/000115817216000170/0001158172-16-000170-index.htm , the Committee regards the investigation as 'substantially complete', and has made recommendations for improving accounting and internal control practices. However, it also says it will look further into the effect of the errors and misstatements on other transactions, stating: 'there may be additional accounting adjustments as a result of these efforts and such adjustments may be material'. Further ramifications could include a review of stock grants to senior execs of the company, based on share price targets which were narrowly achieved; and the stock-based acquisition of Rentrak, some of whose shareholders are already in dispute with comScore.

Based on the results of the investigation to date, the extent of the misstatements is as follows for the annual reports:

	Revenue		Operating (Loss) Income
	Prev reported	Adjusted to	Prev reported	Adjusted to
Year Ended Dec 31st 2013	$286.9m	$283.6m	$3.09m	$1.64m
Year Ended Dec 31st 2014	$329.2m	$312.9m	($14.78m)	($14.77m)
Year Ended Dec 31st 2015	$368.8m	$339.9m	($2.65m)	($10.80m)

[amounts given are 'preliminary, unaudited and subject to change']

The company 'is working toward filing its restated consolidated financial statements as soon as practicable' - but cannot at present say when that will be.

Although the long period of uncertainty has unsettled investors and the potential fallout for executives is unknown at present, there are bright spots in the picture now for the measurement giant. Firstly, the discrepancies in figures, although substantial, are not sufficient to change the picture of a company whose revenue is growing fast, and in general terms the 'errors' do not undermine a business model that is widely considered robust - especially with the addition of the rudely healthy Rentrak. Secondly, the very fact that the errors were there in accounts for the WSJ and others to see arguably limits the extent to which those responsible could be said to be hiding anything, 'though it does underline the Auditors' comments about control deficiencies.

Thirdly, the share price, which had been down as low as $21.74 in June, has since recovered to around $30 and has held firm following the report (it's risen by 8% today), indicating that the market had factored in the potential for news at least this bad. WPP has continued buying comScore stock while the report was still pending, and currently holds just under twenty percent of the company. Lastly, comScore continues to roll out its successful vCE service in new markets, and launch new tools. We await further news about the legal implications of the above errors with interest, but many of those working with the company may be greeting the news that this first stage of the clean-up appears to be over with a small sigh of relief.

Web site: www.comscore.com .