Dell 2006 Annual Report Download - page 116

Table of Contents
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Account reconciliations over balance sheet accounts were not always properly and timely performed, and the reconciliations and their supporting documentation were not consistently reviewed for completeness, accuracy, and
timely resolution of reconciling items; and
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We did not design and maintain effective controls to ensure the completeness, accuracy, and timeliness of the recording of accrued liabilities, reserves, and operating expenses, primarily related to our accrued warranty obligations, goods and
services received but not invoiced, customer rebates, and nonproduction operating expenses.
These material weaknesses resulted in the restatement of our annual and interim financial statements for Fiscal 2003, 2004,
2005, and 2006 and the first quarter of Fiscal 2007, and resulted in adjustments, including audit adjustments, to our annual
and other interim financial statements for Fiscal 2007. Additionally, these material weaknesses could result in misstatements
of substantially all of our financial statement accounts that would result in a material misstatement of our annual or interim
consolidated financial statements that would not be prevented or detected on a timely basis.
Based on management's evaluation, because of the material weaknesses described above, management has concluded
that our internal control over financial reporting was not effective as of February 2, 2007. Our independent registered public
accounting firm, PricewaterhouseCoopers LLP, has audited management's assessment of the effectiveness of our internal
control over financial reporting as of February 2, 2007, and that report appears in this Report.
Remediation Plan
Our management, under new leadership as described below, has been actively engaged in the planning for, and
implementation of, remediation efforts to address the material weaknesses, as well as other identified areas of risk. These
remediation efforts, outlined below, are intended both to address the identified material weaknesses and to enhance our
overall financial control environment. In January 2007, Michael S. Dell re-assumed the position of Chief Executive Officer
and Donald J. Carty assumed the position of Chief Financial Officer. The design and implementation of these and other
remediation efforts are the commitment and responsibility of this new leadership team.
• Our new leadership team, together with other senior executives, is committed to achieving and maintaining a strong control
environment, high ethical standards, and financial reporting integrity. This commitment will be communicated to and
reinforced with every Dell employee and to external stakeholders. This commitment is accompanied by a renewed
management focus on decision-making and processes that are intended to achieve maximum shareholder value over the
long-term and a decreased focus on short-term, quarter-by-quarter operating results.
• As a result of the initiatives already underway to address the control deficiencies described above, we have effected
personnel changes in our accounting and financial reporting functions. Consequently, many of the employees involved in
the accounting processes in which errors and irregularities were made are no longer involved in the accounting or financial
reporting functions. In addition, we have taken, or will take, appropriate remedial actions with respect to certain employees,
including terminations, reassignments, reprimands, increased supervision, training, and imposition of financial penalties in
the form of compensation adjustments.
• We are in the process of reorganizing the Finance Department, segregating accounting and financial reporting responsibility
from planning and forecasting responsibility, with a renewed commitment to accounting and financial reporting integrity. We
have appointed a new Chief Accounting Officer and have strengthened that position, making it directly responsible for all
accounting and financial reporting functions worldwide. In addition, we are implementing personnel resource plans, and
training and retention programs, that are designed to ensure that we have sufficient personnel with knowledge, experience,
and training in the application of GAAP commensurate with our financial reporting requirements.
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