Diebold reaches SEC aggreement

ATM and electronic voting machine maker Diebold Inc. will restate earnings going back four years after concluding discussions with the Securities and Exchange Commission on how the Green company recognizes ...

[LilOne]

I wonder who their auditors are? "Bill and Hold" is the first example of improper revenue recognition I learned...and I'm not even an accountant.

I would expected an audit to uncover this as an issue sooner. Just makes me wonder how accurately other companies are in reporting revenue at the right time, if Diebold got away with this for so long.

[Truth Hurts]

By the way, it's agreement, not aggreement! What the heck?! Did the editor call off??

[True Patriot]

LilOne wrote:

I wonder who their auditors are? "Bill and Hold" is the first example of improper revenue recognition I learned...and I'm not even an accountant.
I would expected an audit to uncover this as an issue sooner. Just makes me wonder how accurately other companies are in reporting revenue at the right time, if Diebold got away with this for so long.

Recognizing revenue on bill-and-hold transactions is a much more common accounting practice than you would believe, and is perfectly acceptable so long as the GAAP established criteria is followed. Evidently, Diebold was not meeting all three of the prongs of the GAAP criteria.

[LilOne]

True Patriot wrote:

<quoted text>
Recognizing revenue on bill-and-hold transactions is a much more common accounting practice than you would believe, and is perfectly acceptable so long as the GAAP established criteria is followed. Evidently, Diebold was not meeting all three of the prongs of the GAAP criteria.

Would you expect an effective audit to recognize that the three prongs of GAAP weren't being met?

[The Big Lebowski]

LilOne wrote:

<quoted text>
Would you expect an effective audit to recognize that the three prongs of GAAP weren't being met?

No. Obviously you have never dealt with auditors before. I have, especially from the Big Four and can tell you that people put way too much faith in the ability of these firms to conduct a true audit. After all, Arthur Anderson was the auditor for Enron and signed off on all their audits.

[LilOne]

The Big Lebowski wrote:

<quoted text>
No. Obviously you have never dealt with auditors before. I have, especially from the Big Four and can tell you that people put way too much faith in the ability of these firms to conduct a true audit. After all, Arthur Anderson was the auditor for Enron and signed off on all their audits.

Arthur Anderson was in the pocket of Enron. I know people who actually worked on that audit.

I used to work for the Big Four...not in Financial Audit, but in a support role. That's why I used the term 'effective audit.'

Sarbanes-Oxley has changed the audit world from a numbers game to a 'control-based' audit. So now, audits are focused more on the process and the controls in that process than on beating up the numbers.

I would think that an effective audit, in compliance with regulations, should have documented the process flow and its risks and controls, and identified that revenue wasn't being recognized in accordance with GAAP. Improper revenue recognition should have been identified as a risk....and a control should have been tested that mitigates that risk.

Given that a misstatement was made, and a material one at that, I would think that charges should be brought against the Diebold executives who signed the assertion that their control environment is adequate to prevent or detect material misstatements...and that regulators should be looking at the audit practices of their external auditors too. Isn't that what SOx is about?

[The Big Lebowski]

LilOne wrote:

<quoted text>
Arthur Anderson was in the pocket of Enron. I know people who actually worked on that audit.
I used to work for the Big Four...not in Financial Audit, but in a support role. That's why I used the term 'effective audit.'
Sarbanes-Oxley has changed the audit world from a numbers game to a 'control-based' audit. So now, audits are focused more on the process and the controls in that process than on beating up the numbers.
I would think that an effective audit, in compliance with regulations, should have documented the process flow and its risks and controls, and identified that revenue wasn't being recognized in accordance with GAAP. Improper revenue recognition should have been identified as a risk....and a control should have been tested that mitigates that risk.
Given that a misstatement was made, and a material one at that, I would think that charges should be brought against the Diebold executives who signed the assertion that their control environment is adequate to prevent or detect material misstatements...and that regulators should be looking at the audit practices of their external auditors too. Isn't that what SOx is about?

I think you are being a bit too zealous on this one. In Diebold's case, it was simply an issue of the timing of when revenue was booked. It is not like Enron where they were creating revenue out of thin air.

[Howard Beale Jr]

And you trust these characters and their machines with your votes. Ha.

[LilOne]

The Big Lebowski wrote:

<quoted text>
I think you are being a bit too zealous on this one. In Diebold's case, it was simply an issue of the timing of when revenue was booked. It is not like Enron where they were creating revenue out of thin air.

Maybe I am....but as an investor, my concern is a complete and accurate 10K...which wouldn't be complete and accurate if revenue was recognized inappropriately before cut-off.

I'd say a risk wasn't properly identified or mitigated...and so whoever signed off on the control environment did so either knowingly or without proper information from Management. Given the press on this one, even if there is no legal action, I'm guessing someone's head is going to roll...whoever is responsible for internal audit or Management's tests of controls.