Dell hit by $150m accounting scandal

Dell has been forced to restate between $50m and $150m in net income

Dell has been forced to restate between $50m and $150m in net income over 2002 through the first quarter of this year.

The lower revenues amount to a less than one per cent reduction of the period's aggregate net income of $12bn.

A company investigation found that employees had made adjustments to reserve and liability accounts to achieve certain performance and financial targets at the close of a quarter.

The investigation also found evidence that excess balances were used to offset unrelated expenses in later periods.

Dell admitted that it "did not maintain effective controls over the period-end reporting process". The company has fired or reprimanded the staff members concerned.

The PC maker is also reorganising its accounting department to separate accounting and financial reporting from planning and forecasting.

The Securities and Exchange Commission has launched an investigation into the accounting irregularities which is set to continue. The investigation forced Dell to delay its earnings release.

Dell is not the first IT vendor at which managers have turned to colourful accounting to ensure their end of quarter bonuses.

Computer Associates overstated earnings by $2.2bn over 2000 and 2001, allowing executives to qualify for a generous incentives package.

The software vendor's former chief executive, Sanjay Kumar, is currently serving a 12-year prison sentence for his role in the affair.