Harvey Norman can't explain share drop

Harvey Norman says a report that the corporate regulator is investigating some of the retailer's accounting practices contains false statements and conclusions.

Harvey Norman has rejected a report that it is being investigated by the corporate watchdog. (AAP)

Harvey Norman has rejected a report that the corporate watchdog is reviewing how the retailer reports its exposure to losses made by its franchisees.

Harvey Norman shares fell eight per cent on Monday, and the Australian Securities Exchange (ASX) asked the company if it knew why.

The ASX also sought the company's response to an article in The Australian Financial Review (AFR) on the weekend that claimed the Australian Securities and Investments Commission is reportedly reviewing how Harvey Norman reports its exposure to franchisee losses.

"The AFR article makes false statements and assumptions and then proceeds to make assertions and draw conclusions, which are also false, based upon those false statements and assumptions," Harvey Norman said in its response to the ASX.

The company also said its recent financial reports are in accordance with the law, and said it is not aware of any information that has not been announced to the market that could explain recent trading in its shares.

Harvey Norman shares have since recovered some of Monday's losses, up 16.5 cents, or 3.8 per cent, at $4.525 at 1140 AEDT.