Computer maker Dell has announced the results of its year-long audit into its much-publicized accounting problems, and the results don’t show the company in a kind light. The company says it will be restating its earnings for its 2003 through 2006 fiscal years, and says its net income for that period will go down by anywhere from $50 to $150 million. The largest hits will come during the first fiscal quarter of 2003 and the second fiscal quarter of 2004.
Dell says it has re-assigned, reprimanded, and terminated employees responsible for the earnings mis-statements, and has increased supervision of its accounting practices. The company has not identified executives responsible for the misleading earnings information.
The motivation for the financial mis-statements appears to have been meeting quarterly financial targets, with executives shifting revenues and liabilities between accounts and periods to make a particular quarter look better than it actually was. In some cases, Dell found that in several instances businesses units and personnel reported incomplete or purposefully incorrect information to both internal and external auditors.
The audit committee pored through more than five million documents, conducted over 200 employee interviews, and reviewed thousands of journal entries and financial documents in creating their report.
Dell’s vice chairman and CFO tried to put a positive spin on the results: "The rigorous examination of our accounting and finance processes, along with the remedial actions taken and planned, have made and will continue to make Dell a far stronger company and provide a solid foundation on which to move the business forward, reinforce our standards and focus our energy on serving our customers." Nonetheless, it’s a testimony to the continued size of Dell’s business that the numbers are not expected to have any material impact on Dell’s financial statements going forward. If the U.S. Securities and Exchange Commission is satisfied with the audit, the conclusion of the investigation could be a good thing for the company, enabling it to focus solely on rebuilding its market share, rather than re-figuring its old numbers.
