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Dell restates financials; Says books were cooked

Dell is putting some past accounting issues behind it.Dell said Thursday that it will restate its financial results for the last four years and first quarter of fiscal 2007.
Written by Larry Dignan, Contributor

Dell is putting some past accounting issues behind it.

Dell said Thursday that it will restate its financial results for the last four years and first quarter of fiscal 2007.

The news comes as Dell wraps up a long audit.

In a statement, Dell said it found evidence of cooking the books to make quarters.

The investigation, which began August 2006, involved more than 375 professionals deployed across all the company's major regions. The investigation team evaluated more than five million documents, conducted more than 200 interviews of company personnel and reviewed thousands of journal entries and supporting documentation.

The investigation raised questions relating to numerous accounting issues, most of which involved adjustments to various reserve and accrued liability accounts. 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. The investigation concluded that a number of these adjustments were improper, including the creation and release of accruals and reserves that appear to have been made for the purpose of enhancing internal performance measures or reported results, as well as the transfer of excess accruals from one liability account to another and the use of the excess balances to offset unrelated expenses in later periods. The investigation found that sometimes business unit personnel did not provide complete information to corporate headquarters and, in a number of instances, purposefully incorrect or incomplete information about these activities was provided to internal or external auditors.

Dell concluded that it didn't have proper controls in place to keep the aforementioned behavior in check. It has said remedial action is underway to prevent these problems in the future. Dell said it will address its leadership, personnel actions (such as firing), structure and processes going forward.

Meanwhile, the SEC's investigation of Dell continues.

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