As reported, Dell recently concluded a year-long internal investigation into its accounting practices. As a result, the company will restate its financials for four fiscal years (2003 through 2006) plus the first quarter of fiscal 2007. The good news is that the cumulative decrease in net income will be between $50 and $150 million - peanuts compared with Dell's reported profit of $12 billion during the restatement period.
The bad news, however, is contained in a rather heavily wordsmithed paragraph of Dell's press release:
"The investigation identified evidence that certain adjustments appear to have been motivated by the objective of attaining financial targets. According to the investigation, these activities typically occurred at the close of a quarter. The investigation found evidence that, in that timeframe, account balances were reviewed, sometimes at the request or with the knowledge of senior executives, with the goal of seeking adjustments so that quarterly performance objectives could be met."
It appears that certain senior executives had a chronic case of end of quarter madness, a relatively common disease among executives of publicly traded companies.
Confirming what was evident from Dell's announcement, CFO Don Carty said in a conference call with investors, "We did find evidence of fraud." But neither Carty nor Michael Dell - who reclaimed the CEO role in January - would divulge the identities of the senior executives referenced in the company's release.… Read more