Dell's Long Relationship With PwC Facing A Tough Test
Dell and PwC have maintained a unique relationship in the world of high tech: a decades-long one. The New York-based audit firm has been Dell's independent auditor for twenty years -- going back to 1986 -- and have signed off on every single one of Dell's financial reports on file with the SEC since the advent of theSarbanes-Oxley Act. Dell's chief financial officer, Jim Schneider, was a partner at Price Waterhouse before the company merged with Coopers and Lybrand, and Dell has recommended shareholders approve PwC as its accounting firm for years.
The auditors haven't done the work for free.
Dell has paid PricewaterhouseCoopers more than $22 million over the past two years to provide accounting, audit and control services to the Round Rock, Tex.-based computer company, according to Dell's most recent proxy statement filed with the SEC. AmongPWC's tasks is to keep Dell in compliance with the Sarbanes-Oxley Act.
Section 404 of Sarbanes-Oxley spells out the role of third-party auditing firms in giving corporate financial records a stamp of approval: namely to attest to the accuracy and truthfulness of the financial reporting of a company's managers. And that's where PwC's role becomes crucial.
After Dell announced that it was under investigation, it said it was going through its back financials with its independent auditor. In Dell's Sept. 11 press release, in which it announced it was delaying the filing of its mandatory quarterly report with the SEC amid deepening investigations, the company wrote:
A spokeswoman for PWC declined to comment on Dell, saying the company doesn't talk about its clients. John Carney, a former SEC and U.S. Justice Department lawyer and a current partner in the firm Baker and Hostetler, said that despite the responsibilities of an audit firm under Sarbanes Oxley, Dell still has the primary responsibility to make sure financial numbers are accurate and true.
"The financial statements are the responsibility, first and last, of management," Carney said. "That's the law of management. That's the law (in) securities. The auditors are there in a watchdog capacity." The auditor is tasked with determining whether the financial numbers Dell reports are a good indication of what's really happening.
"There's no way Pricewaterhouse knows as much as the client," Carney said. "It's not always fair to hold them accountable. . . They are not guarantors."
Dell said last week that, after a delay, it will release its financial report for its most recent fiscal quarter by the end of November and will try to file its delayed 10Q for the quarter before that as soon as possible to get back into compliance with SEC regulations.