Dell said Thursday it will re-state financial statements spanning more than four years and admitted that senior executives either knew of or requested the manipulation of its results to meet quarterly profit and sales targets.
The PC maker said it will re-state financial statements for fiscal years 2003 to 2006 and the first quarter of 2007 as a result of the findings made during a year-long probe by an independent audit committee.
Audit committee members investigated more than five million documents, conducted more than 200 employee interviews and reviewed thousands of journal entries and supporting documentation before issuing their report.
“The investigation identified evidence that certain adjustments appear to have been motivated by the objective of attaining financial targets,” Dell
said in its release. “The activities typically occurred at the close of a quarter.”
The investigation also found that some Dell employees did not provide complete information to corporate headquarters and, in a number of instances, provided purposefully incorrect or incomplete information to internal and external auditors.
In August 2006, the Securities and Exchange Commission requested information related to Dell’s revenue recognition and other accounting and financial reporting matters as part of a continuing investigation launched in August 2005.
Along with restating their results, Dell said it is working with the audit committee to develop a detailed plan to implement remedial actions and procedures to prevent future accounting discrepancies.
“We are committed to achieving and maintaining a strong control environment, high ethical standards and financial reporting integrity,” CEO Michael Dell said in the release. “This commitment will be communicated to every Dell employee and external stakeholder. It is accompanied by renewed management focus on decision-making and processes intended to drive long-term shareholder value.”
Dell shares closed off 3 cents a share to $25.90 ahead of the re-statement announcement.
The company said net revenue will be reduced by less than one percent for the re-stated period. Net earnings will be reduced by between 2 cents and 7 cents a share for the restatement period, a fraction of the $4.78 a share the company earned over that time.
Dell said the adjustments are not expected to have a material impact on its current balance sheet.
Dell will announce its second quarter results on August 30. It has only released preliminary financial results for the past four quarters and has yet to file its annual report for the year ended February 2. The company said it expects to file the past-due report in early November.