The former controller and director of finance of Lattice Semiconductor Corp. has agreed to a cease-and-desist order stemming from the company’s recent accounting scandal, according to the Securities and Exchange Commission.
The SEC asserted that when Ronald Lee Hoyt prepared Lattice’s financial statements for the second and third quarters of 2003, he made “unsupported journal entries” totaling $5.5 million “to offset apparent understated balances” in Lattice’s deferred revenue account. The regulator added that Hoyt initially failed to tell anyone at Lattice or at the company’s auditor about the material discrepancies or his unsupported journal entries.
When Lattice learned of the unsupported journal entries, added the SEC, the company conducted an internal investigation and acknowledged its internal controls weaknesses and premature recognition of revenue.
Indeed, in early 2004 Lattice announced that it may have overstated its deferred income account, which represents the company’s judgment regarding the potential gross margin on inventory held by the company’s distributors. Because the company’s accounting policy is to delay recognition of sales to distributors until the product is resold to end customers — a common practice in the semiconductor industry — the company uses a variety of estimates to determine the deferred income account balance, the company pointed out at the time.
Later that year, as the commission also noted, the company restated its financials for the first three quarters of 2003. Lattice reduced its previously reported revenue for that period by about 6 percent and increased its previously reported loss by about 15 percent.
As for Hoyt, the SEC stated that the former finance executive agreed to the order without admitting or denying any of the findings. He is banned from appearing or practicing before the commission as an accountant for three years, at which time he can ask to be reinstated.