Accounting & Tax

Veritas Restates, Reports Controls ”Weakness”

Among the software maker's problems: Internal controls were overridden; inadequate documents were issued; and the company's reviews were lacking.
Stephen TaubJune 15, 2004

Veritas Software Corp. restated its results for the past three years and the first quarter of this one and said its auditor identified “material weakness” in its internal controls.

For 2003, the data-storage software maker lowered previously reported revenue by $24 million, to $1.75 billion, but revised net income upward by $73 million, to $347 million. Excluding the effect of a settlement of tax audits related to the company’s 2000 acquisition of Seagate Technology, however, net income would have dropped by $22 million, the company added.

For 2002, it decreased revenue by $1 million, to $1.5 billion, and increased net income by $1 million, to $58 million. The company also reduced revenue for 2001 by $3 million, to $1.49 billion, cutting its previously reported net loss by $6 million, to $636 million.

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Further, Veritas revised its revenue for the first quarter ended March 31, 2004, by $1 million, to $486 million, and decreased net income by $3 million, to $100 million.

Veritas said the Monday restatement included other errors not included in its March announcement as well as certain revenue, expense, and balance sheet reclassifications.

The company’s accountant, KPMG LLP, also identified “significant internal control deficiencies” that amounted to a “material weakness” in its internal controls that existed during 2003 as well as prior periods. “These internal control deficiencies related to the conduct of certain former financial management and accounting personnel in over-riding internal controls; insufficient documentation and training around standard financial policies and procedures; insufficient review procedures; and insufficient supporting documentation for general ledger account reconciliations and manual journal entries,” Veritas added in the first-quarter 10-Q form it filed Monday.

In March, the company reported that it would revise its results in line with the findings of an independent investigation led by its audit committee into past accounting practices in 2002 and prior periods.