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Tech Data: UK accounting errors cost us $27m

Distie giant restates 3 years worth of profits, beefs up fraud prevention weaponry

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Tech Data (TD) has turned to "external experts" to beef up fraud detection measures after it emerged that righting accounting wrongs at its UK sub had wiped $27m (£16.55m) off net profits for the last three years.

The restatement equates to three per cent of income made during fiscal '11, '12 and '13, the periods that forensic bean counters probed since the mistakes in vendor accounting surfaced in March. The reduction came in at the lower range of initial estimates of between $25m to $33m.

The Audit Committee of independent investigators, and outside counsel, found systemic failings in the UK and two European country operations

"These adjustments primarily correct errors from improper vendor accounting, improper use of manual journal entries, and improper recognition of foreign currency exchange transactions," said TD.

The abacus strokers found inadequate controls over manual journal entries; inadequate account reconciliation processes and inadequate anti-fraud programme controls and monitoring.

In response to the findings, TD said certain UK and Euro staffers "responsible for accounting improprieties" have been shown the door, though it stopped short of naming names.

The Audit Committee have written to all workers to remind them of "ethical matters" and the imperative to comply with laws, Code of Conduct and company accounting policies.

Compensation programmes are to be changed to "better motivate accurate financial reporting and compliance", and tools to document, support and review manual journal entires, and centralise control and finance processes will be introduced.

And in a bid to head off future incidents, TD has "engaged external experts to perform the internal audit function and to assist with the implementation of specific fraud detection procedures".

A Chief Ethics and Compliance Officer has been appointed to evaluate other ways to prevent a re-occurrence of a costly and embarrassing debacle, and in currently reviewing the business structure.

"The company is in the process of evaluating its organizational structure, and roles and responsibilities to enhance controls and compliance," said TD.

NASDAQ-listed TD had until the end of next month to report restated financials for the three fiscal years in question or be booted off it.

The distributor hopes to hold an Annual Meeting of Shareholders for fiscal '13 - which must usually be held within 12 months of a financial year-end - as soon as it can file numbers for fiscal '14, which ended last month.

The company intends to outline its position "with respect to this deficiency" to the NASDAQ Listing Qualification Panel by 10 February to seek an extension period to 30 June.

During this extension it will solicit proxies and hold an annual meeting.

The distributor reiterated that it expects a VAT dispute with the Spanish government will cost $55.6m in various penalties and interest repayments, and is included on the Balance Sheet for fiscal '13. ®

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