Accounting Anomalies Continue for Computer Associates

Computer Associates (CA) will delay its fourth quarter and full year financial results, according to their announcement this week. CA was expected to post 2 cents per share earnings for their fourth quarter, according to the Register. CA did not record an extra $70 million in sales commissions properly and is now expecting to post a share loss amounting to 7 cents.


Advertisement


In a prepared statement, “This increase in sales commission expense resulted from a new sales commission plan that did not appropriately align commission payments with the Company’s overall performance,” according to the Register.

Third quarter results will be adjusted to reflect $26 million in additional commission expense charges. The Register reports that this accounting change will delay a June 8 conference with financial analysts and the release of fourth quarter and full-year results.

In their prepared statement, “The Company also will report a material weakness in its financial controls relating to the forecasting, processing and monitoring of sales commissions. As stated above, the Company has not concluded its review of the matter and further adjustments may be necessary,” according to the Register.

CA has not been far from accounting scandals for the last several years. Back in April, their former CEO Sanjay Kumar and his head of worldwide sales, Stephen Richards, plead guilty for their part in the “35 day month” accounting scandal that was actually perpetrated back in fiscal year 2000. Certain sales periods saw higher income booked using this accounting method, according to the Register. Kumar left CA in June 2004 after an SEC investigation into the company’s accounting irregularities. He was replaced by John Swainson as the company’s CEO.

CA announced in a prepared statement, “We are a dramatically different organization than we were two years ago, when both Mr. Kumar and Mr. Richards left the company,” according to the Register. Kumar and Richards admitted to lying to attorneys and federal investigators in their testimony.

General counsel and senior vice president Stephen Woghin also left the company, as well as their chief financial officer Ira Zar, who left as a result of the accounting fraud. The Register reports that three former senior executives also plead guilty to accounting fraud. Kumar was also found guilty of bribing a vendor to avoid reporting the fraud to authorities.

In a prepared statement, the U.S. Attorney’s Office said that these two presided over a “systemic, company-wide practice of falsely and fraudulently recording and reporting … fiscal quarter revenue.” Sentencing will come on September 12, 2006.

CEO Swainson said in a prepared statement, “Clearly we are disappointed that what would have been a solid year was impacted by execution issues relating to commissions, which adversely affected our fourth quarter performance and led to the restatement of our third quarter results. We are making changes to ensure these problems do not recur, and are confident going forward that our value proposition of helping customers manage and secure their enterprise IT environments is sound.”

You may like these other stories...

Starting in January 2015, the IRS will limit the number of refunds that are electronically deposited into a single financial account or pre-paid debit card to three, as part of the agency’s effort to crack down on...
House proposes $10.5B, eight-month highway billThe House Ways and Means Committee proposed a transportation funding bill on Tuesday that calls for a temporary extension of current transportation funding levels until May 31,...
Swiss banks threaten freeze on US accounts over tax evasionJames Shotter of the Financial Times reported on Monday that several Swiss banks have threatened to freeze American clients’ accounts unless they prove they...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.