Based on the case1. What accounting issue led to the problem?2. Recommendations & Reasoning3....

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Based on the case1. What accounting issue led to the problem?2. Recommendations & Reasoning3. Impact: US accounting/auditing standards, investors, auditors, management, and economy

Robert · Accepted Answer

1. What accounting issue led to the problem? 
Dell
1
 had bad operating results from FY 2002 to FY 2005. But it used manipulative 
accounting to show the results better. It received payment from its major vendor Intel for 
exclusively using Intel chip and not using AMD chip(the major competitor of Intel). Dell 
received payments from Intel with knowledge that these payments violated both the 
Sherman Act, the Clayton Act, and the Robinson-Patman anti-trust laws of the United 
States.  Dell Inc recorded illegal anti-trust payments from Intel as operating revenues in 
each of 2002 through 2006 fiscal years.  In 2006 payments from Intel accounting for 
more than three quarters of Dell‘s operating revenue. Hence operating incomes were 
artificially increased.

Based on the case1. What accounting issue led to the problem? 2. Recommendations & Reasoning3. Impact: US accounting/auditing standards, investors, auditors, management, and economy

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