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Probe into Dell accounting widens

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Stumbling computer maker Dell has been forced to delay a second quarter financial report and to put its stock repurchase program on hold as it deals with federal and state accounting probes.

Dell last month revealed that the US Securities and Exchange Commission (SEC) had started looking into its past financial statements. The company has kicked off its own internal audit to complement the Feds' investigation. Dell has delayed the filing of its second quarter Form 10-Q filing as a result but vowed to file the paperwork "as soon as possible." Dell has also halted its share repurchase program.

"The investigations have indicated the possibility of misstatements in prior period financial reports, including issues relating to accruals, reserves and other balance sheet items that may affect the company's previously reported financial results," Dell said. "The company is working with the Audit Committee and with the company's independent auditors to determine if any restatements of prior period financial reports will be necessary."

The US attorney's office for the Southern District of New York has also chipped in with its own informal probe of Dell and has requested documents from the vendor for periods stretching from 2002 to the present.

"We are fully cooperating with the investigations and working to resolve any and all issues raised in connection with those investigations as quickly as possible, and we will take any appropriate remedial or corrective actions to address any problems," Chairman Michael Dell said.

Merrill Lynch analyst Richard Farmer characterized Dell's disclosures as "sparse," in a research note. "The accounting uncertainty is an additional overhang for the stock, though the company has not provided sufficient information for us to judge materiality," Farmer wrote.

Dell's stock has been in a massive slump as the company has struggled to deal with sliding PC and server sales. ®

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