PracticeAuditE&Y subpoenaed in Computer Associates probe

E&Y subpoenaed in Computer Associates probe

Ernst & Young, the former auditor of US-based Computer Associates, has been issued with a subpoena by the the Securities and Exchange Commission, after the watchdog widened its investigation into the accounting practices at the software giant.

According to an SEC filing from CA, subpoenas have already been issued to the company’s former auditors and others outside the company. CA said it would continue to co-operate fully with the probe, as did former auditors Ernst & Young.

The SEC probe is said to be concentrating on CA’s switch to recognising licence revenue over the life of the contract instead of at the time of sale.

News of the probe, and other issues, could well affect the company’s standing among new customers, according to analysts.

‘Regardless of the financial reporting issues, CA has a history of giving senior executives large rewards as well as negative issues regarding service, support and pricing,’ said Betsy Burton, vice president and research area director at Gartner.

CA’s new principles announced yesterday comprise general policies and procedures with regard to the company’s board. They also outline how board members are to be compensated in future.

According to Gartner, while CA’s revenues from new business have actually fallen over the past few years of negative news, the company has made headway with its existing user base.

‘We don’t believe CA’s customer base are paying a lot of attention to the investigation. CA have done a good job shoring up support amongst their existing users,’ said Burton.

Both the SEC and US Attorney’s Office are believed to be looking into whether CA inflated revenue from software-licence leases in order to report higher earnings.

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