Item 4. Changes in Registrant's Certifying Accountants
On April 23, 1998, Ernst & Young LLP ("EY") informed the Corporation of its
resignation as the Corporation's auditor.
The reports of EY on the Corporation's financial statements for the past two
fiscal years did not contain an adverse opinion or a disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope, or
accounting principles. In connection with the audits of the Corporation's
financial statements for the years ended December 31, 1997 and 1996, and
in the subsequent interim period, there were no disagreements with EY on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope and procedures which, if not resolved to the satisfaction
of EY would have caused EY to make references to the matter in their report.
In connection with the audit of the Corporation's financial statements for
the year ended December 31, 1997, EY informed the Corporation and its
Audit Committee of a material weakness in its policies, systems, procedures
and internal controls necessary to assure that revenues, costs and loss
contracts are properly recognized in the consolidated financial statements
under the percentage of completion method of accounting for Year 2000
compliance consulting and program renovation services contracts. Management
of the Corporation agreed with EY's conclusion that there was a material
weakness in such policies, systems, procedures and internal controls.
To address the weakness identified by EY, management took measures to
improve the Corporation's internal controls, including enhanced record
keeping with respect to costs of completion of contract work and enhancements
to the Corporation's cost estimation methodologies. Management designed these
measures based in part on certain of the procedures performed at EY's request
to provide information to EY in the course of its audit engagement on behalf
of the Corporation. As a result of that audit engagement, EY issued an
unqualified opinion on the Corporation's financial statements for the year
ended December 31, 1997. EY advised us that, in completing its audit, it
considered the aforementioned material weakness in determining the nature,
timing and extent of procedures performed to enable it to issue the
unqualified opinion.
By letter dated April 30, 1998, the Corporation authorized and requested
EY to cooperate with, and provide full information to, the Corporation's
successor auditors pertaining to the material weakness identified by EY. The
Corporation has not yet identified successor auditors. A copy of the
April 30, 1998 letter to EY is filed as Exhibit 99 to this Form 8-K. The
Corporation has requested EY to furnish it a letter addressed to the
Commission stating whether it agrees with the above statements. A copy
of that letter, dated April 30, 1998, is filed as Exhibit 16 to this Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STRATEGIA CORPORATION
April 30, 1998 /s/ Richard W. Smith
Date Richard W. Smith,
(Chief Executive Officer)
(Chief Financial Officer)
(Chief Accounting Officer)
EXHIBIT 16
April 30, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
We have read Item 4 of Form 8-K dated April 30, 1998, of Strategia
Corporation and are in agreement with the statements contained therein,
except that we have no basis on which to agree or disagree with the
statements contained in the third and fourth sentences of the third paragraph.
Regarding the registrant's statements concerning Ernst & Young LLP
informing the Corporation and its Audit Committee of a material weakness
in its policies, systems, procedures and internal controls necessary to
assure that revenues, costs and loss contracts are properly recognized in the
consolidated financial statements under the percentage of completion
method of accounting for Year 2000 compliance consulting and program
renovation services contracts, included in the first and last sentences of
third paragraph of Item 4, we had considered such matter in determining
the nature, timing and extent of procedures performed in our audit of the
registrant's 1997 financial statements.
/s/ Ernst & Young LLP
EXHIBIT 99
April 30, 1998
David Hughes
Partner
Ernst & Young LLP
1300 Chiquita Center
250 East Fifth Street
Cincinnati, OH 45202
Dear Mr. Hughes:
During the course of its audit of the financial statements of Strategia
Corporation for the fiscal year ended December 31, 1997, Ernst & Young
LLP advised the Corporation that it had identified a material weakness in
the policies, systems, procedures and internal controls of the Corporation.
The Corporation has taken measures to address that weakness. By this letter,
the Corporation authorizes and requests Ernst & Young to cooperate fully
with, and to respond fully to any inquiries made by, the Corporation's
successor auditor (and firms that, at the Corporation's request, are
contemplating becoming the Corporation's successor auditor). This
authorization and request is intended to cover all information related to
Ernst & Young's previous engagements by the Corporation including,
without limitation, information pertaining to the identified weakness and,
to the extent of Ernst & Young's knowledge, the adequacy of the Corporation's
corrective measures.
Sincerely,
/s/ Richard W. Smith
Richard W. Smith
President
