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The wireless network equipment maker says information about customer contracts was withheld from management and auditors.
Stephen Taub, CFO.com | US
May 25, 2006
UTStarcom, Inc. said it will restate its results for nearly three years due to premature revenue recognition on a contract with a customer in India, as well as several other transactions.
The maker of wireless network equipment and cellular phones said it will lower revenue by a total of $49.6 million and net income by roughly $11.8 million.
The company had announced earlier this year that its audit committee and a team of forensic accountants were conducting an investigation into the revenue recognition issue. It initially estimated that $22 million in revenue from the India contract had been prematurely recognized.
"Management has concluded that certain information was withheld from management and the company's auditors at the time revenue was originally recorded, which resulted in inappropriate revenue recognition during several of the quarters from 2003 through 2005," the company added in a press release.
The company also said that it has identified a limited number of certain other transactions in which revenue was prematurely recognized because certain elements of these contracts were undelivered at the time of the original recognition.
The company warned that due to the continued existence of previously identified material weaknesses, its management will conclude that the company's internal control over financial reporting was not effective as of December 31, 2005.
As a result, its independent accounting firm will contain an adverse opinion with respect to the effectiveness of the company's internal control over financial reporting, the company noted.