US software giant in accounting probe
Computer Associates, which has been dogged over recent months with several high profile embarrassments, has become the latest company to be investigated for so-called 'pro forma' accounting.
Reports suggest CA used the non-standard pro forma accounting practice in its reporting of financial results, which if used alone can make profits and sales look misleading.
A preliminary inquiry will be conducted after former employees alleged that CA used pro forma accounting to inflate its results.
In December, US financial regulator, the Securities and Exchange Commission warned that companies and investors should view pro forma financial statements ‘with appropriate and healthy scepticism’.
The group added that ‘because pro forma financial information by its very nature departs from traditional accounting conventions, its use can make it hard for investors to compare an issuer’s financial information with other reporting periods and with other companies.’
Following the collapse of energy giant Enron, US regulators are particularly sensitive to corporate financial misinformation, and IBM also came under fire this week for ‘creative accounting’. It is also believed that other pro forma accounters include Cisco and Amazon.
2001 saw CA having to explain away a plethora of bad news ranging from poor customer relations, job cuts, illegal price-fixing allegations and most embarrassing of all, boardroom bust-ups.
Shares in CA closed 1.75% down yesterday in New York at $25.31.
The company is audited by KPMG.