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Dell’s announcement came after its Audit Committee completed an independent investigation into the firm’s accounting and financial reporting matters.

Dell said that the investigation raised questions relating to numerous accounting issues, most of which involved adjustments to various reserve and accrued liability accounts. The investigation identified evidence that certain adjustments appear to have been motivated by the objective of attaining financial targets and typically occurred at the close of a quarter.

"The investigation found evidence that, in that timeframe, account balances were reviewed, sometimes at the request or with the knowledge of senior executives, with the goal of seeking adjustments so that quarterly performance objectives could be met."

In order to meet the expectations of shareholders and Wall Street analysts, Dell's finance department bent accounting rules to make up for shortfalls in certain quarters and under-reported results in others, each time ensuring that Dell did in fact hit profits targets that financial analysts were expecting.

"A number of these adjustments were improper, including the creation and release of accruals and reserves that appear to have been made for the purpose of enhancing internal performance measures or reported results, as well as the transfer of excess accruals from one liability account to another and the use of the excess balances to offset unrelated expenses in later periods. "

"Sometimes business unit personnel did not provide complete information to corporate headquarters and, in a number of instances, purposefully incorrect or incomplete information about these activities was provided to internal or external auditors," according to Dell.

"As a result of accounting errors and irregularities identified in that investigation and in additional reviews conducted by Dell management, the Audit Committee has determined to restate the company’s financial statements relating to fiscal 2003, 2004, 2005 and 2006 (including the interim periods within those years) and the first quarter of fiscal 2007."

"The accounting errors and irregularities that will be corrected are significant because of the combination of the number of issues identified, the qualitative nature of many of the issues, and in some cases, the dollar amounts involved. Many of the adjustments offset each other during the restatement period, and most relate to the timing of the recognition of income and expenses."

Dell management concluded that the company did not maintain an effective control environment, including a tone and control consciousness that consistently emphasised strict adherence to Generally Accepted Accounting Principles (GAAP). In addition, it said it had concluded that the company did not maintain effective controls over the period-end reporting process, including controls with respect to the review, supervision and monitoring of accounting operations. Dell expects to conclude that these control deficiencies constituted material weaknesses in the company’s internal control over financial reporting.

Dell refused to single out specific individuals responsible for the errors and put it down largely to insufficient personnel with knowledge, experience, and training in GAAP principles. Financial leaders will be required to take comprehensive, ongoing accounting standards and policies training. Personnel actions, including terminations, reassignments, reprimands, increased supervision, training and financial penalties, have been or will be taken.

The company is in the process of reorganising its Finance function, segregating accounting and financial reporting responsibility from planning and forecasting, to ensure increased independence. The position of Chief Accounting Officer has been strengthened, making it directly responsible for all accounting and financial reporting functions worldwide.

Dell's chief financial officer Jim Schneider stepped down in January and was replaced by Donald Carty.

Ironically, the computer firm that pioneered IT sales over the Internet admitted that most of its journal entry processes, including account reconciliation and documentation requirements, were done manually, increasing the opportunities for errors or omissions. Dell will now invest in the design and implementation of IT systems in order to eliminate manual processes.

The Audit Committee investigation began as a result of concerns raised by documents and information discovered in the course of responding to requests from the Enforcement Division of the U.S. Securities and Exchange Commission (the “SEC”) in connection with an investigation into Dell's accounting and financial reporting practices.

The investigation, which began August 2006, involved more than 375 professionals deployed across all the company’s major regions. The investigation team evaluated more than five million documents, conducted more than 200 interviews of company personnel and reviewed thousands of journal entries and supporting documentation.

Dell said it believes that the adjustments are not expected to have a material impact on the current balance sheet. The restatement of Dell's accounts over the past four years is expected to see net revenue for each annual period reduced by less than 1 per cent of the previously reported revenue for the period. The cumulative change to net income for the restatement period is expected to be a reduction of between $50 million and $150 million, compared to previously reported net income of more than $12 billion for the restatement period.

In response to the investigation’s findings, Dell said it has undertaken a number of remedial actions that are in various stages of completion and will continue to be implemented going forward.

“We are committed to achieving and maintaining a strong control environment, high ethical standards and financial reporting integrity,” said Michael Dell, chairman and CEO. “This commitment will be communicated to every Dell employee and external stakeholder. It is accompanied by renewed management focus on decision-making and processes intended to drive long-term shareholder value.”