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InterTan Inc., which runs RadioShack in Canada, says a clerk who wanted to please a vice-president has left behind an accounting mess involving more than $1.2-million (U.S.) in fictitious payments.

That was one of two pieces of bad news yesterday for InterTan, based in Barrie, Ont. The other involved warehouse problems that led management to trim its profit guidance for the current bookkeeping year. The share price fell more than 17 per cent to close at $7.19, down $1.51, on the New York Stock Exchange.

Joining the list of companies where accounting investigations have shrunk reported profit, InterTan withdrew figures it had issued 20 days earlier.

InterTan cut after-tax profit by $704,000 or 3 cents a share for the bookkeeping year than ended on June 30. The revised profit is $13.6-million or 53 cents a share, compared with $23.5-million or 82 cents a year earlier.

In an investor conference call before the market opened, executives said a senior accounting clerk has been fired for dishonesty, although she did not profit financially from her actions, and the vice-president, who stood to receive an increased bonus, has left the company for unrelated reasons.

James Maddox, InterTan's chief financial officer, later said the relationship between the two was "totally platonic."

He said the company will not name them at this time, although it is considering legal action against the clerk and investigating the former vice-president's role in the situation, if any.

President Brian Levy said he disclosed the problem with "a great deal of regret and embarrassment," a thought echoed by a U.S. analyst who follows the stock.

"I think it's a big black eye in this day and age," said Howard Rosencrans of HD Brous & Co. of Great Neck, N.Y. "Do I think it's enough of a black eye to affect the share price? In conjunction with reduced [profit] guidance, yes."

Explaining the situation, Mr. Levy and Mr. Maddox said the clerk kept track of co-operative advertising payments due from manufacturers whose goods the company sells. Manufacturers often subsidize RadioShack ads and flyers through co-op payments worth anywhere from half of 1 to 20 per cent of the value of the goods, Mr. Maddox said in an interview.

The clerk is accused of inventing many such payments, Mr. Levy told the conference call.

"While it's always difficult to speculate on what causes somebody to do things that are dishonest, the best that we can figure out [about] the motivation, having interviewed this person, is that person did this in order to perhaps be that much more popular with certain people she worked around -- in the advertising department, per se, a vice-president who is no longer with the company, who left the company for other reasons.

"But now, having said that, we don't know what that person's side of the story is, meaning the former vice-president, as we have not had the opportunity to interview that person. There was some financial gain to the extent of 10,000 Canadian dollars that that person would have enjoyed in the form of increased bonus remuneration."

The clerk's immediate boss, InterTan's accounting director, failed to check her work and the company's outside auditors, PricewaterhouseCoopers LLP, did not spot the alleged scheme in the recently completed annual audit, the two men said.

Brian Foley, the PricewaterhouseCoopers partner in charge of the audit, nonetheless claimed part of the credit for the discovery. "The issue that we detected was not the fraud," he said in an interview. "The issue that we detected was that some of these receivables were not being collected as fast as they should be."

When management looked into the situation, there was no paperwork to support the supposed payments, he said.

The second problem that surfaced in the past 20 days involved equipment headaches at InterTan's revamped distribution centre. Stores were left short of stock and the company had to employ more warehouse workers, not fewer, the executives said.

As a result, management's profit target for year ending next June was scaled back to 80 to 90 cents a share. It previously was 85 to 95 cents.

The disclosures drew a barrage from Richard Keim, a portfolio manager at New York-based Kensington Management Group, during the conference call.

"It looks to me that this company is out of control," he told Mr. Levy. "You've given a lot of estimates [and] not made your estimates and it seems to me that you guys really have to think about one thing: changing management, No. 1 or No. 2 buying back the stock and going private. To my mind, there's no excuse for this."