updated 10/29/2007 7:20:54 PM ET 2007-10-29T23:20:54

Office Depot Inc. on Monday delayed its third-quarter earnings report due to its audit committee's independent review of vendor program funds, a development that one analyst said raised questions about the nation's second-largest office supplies retailer's financial statements.

Its shares fell more than 14 percent.

The review primarily relates to the timing of the recognition of certain funds, the Delray Beach-based company said. Office Depot had been scheduled to release its third-quarter results Tuesday; a new date wasn't released.

Specifics of the delay and the funds were not clear. An Office Depot spokesman declined comment.

Shares of Office Depot dropped $2.86, or 14.1 percent, to close at $17.43 Monday.

"While the scope and specific drivers of the issues are unclear, the presence of any investigation with the involvement of the board, suggests questions about the integrity of the company's financial statements and, as such, render the valuation process challenging," Goldman Sachs retail analyst Matthew Fassler wrote in a report.

Although it was premature to assess if there were any "untoward practices" to attribute to any individual, the analyst expects "high sensitivity to this issue given the significant margin expansion noted in the early portion of Steve Odland's tenure," the report said.

Odland was named chairman and chief executive officer in March 2005.

Lehman Brothers analyst Brad Thomas stressed that it was too early to tell how this affects Office Depot, but he said delays related to the timing of reporting vendor funds happen rather often in the retail industry. Suppliers enter into agreements with retailers for rebates and advertising allowances, which companies must account for.

"This often has been a one-time issue rather than something that impacts growth rate and cash flow," Thomas said.

Analysts polled by Thomson Financial had expected earnings of 41 cents per share on sales of $3.9 billion for Tuesday's earnings.

In the second quarter, profits dipped 8 percent as weak sales in North America offset double-digit growth in international revenues. North American sales have been hurt by the weak economy, with changes in the housing market and higher fuel and construction costs leading to slower sales of big-ticket items such as furniture and technology products.

Office Depot has annual sales of more than $15 billion and sells to customers in 42 countries. It is the nation's second-largest office supplies retailer after Framingham, Mass.-based Staples Inc.

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