Dell Evaluation of Business Risk

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RE: Assessment of Dell’s Business Risk The purpose of this memo is to assess business risk related to Dell, Inc. which includes establishing factors that would affect the profitability of the company and the potential of material misstatements. Considering the fast-track innovation trend in mobile computing and low barriers to entry, the competition among existing firms is high. In fiscal year ended February 2012, Dell derived 80% of its sales revenue from its three commercial customer segments. Increasing competition from the likes of Apple and HP has also eaten into Dell's market share and impacted its long-term strategy. Dell is dedicating its resources into aggressive acquisitions to keep up with technological advancements such as cloud computing and tech infrastructure. Our risk assessment included the review of Dell’s financial statements for the fiscal years’ ending 2010, 2011, 2012; the 2012 10-K; and an analysis of key financial ratios. Additionally, we reviewed Dell’s 2007 10-K with regards to its internal controls. In 2007, Dell and its auditors, PricewaterhouseCoopers issued opinions that Dell did not maintain effective internal controls over financial reporting as of February 2, 2007. As a result, Dell restated its fiscal 2006 and 2005 consolidated financial statements and implemented an extensive remediation plan. As a result of these investigations, we rated our findings on a scale of low - high in terms of risk as follows: Internal Controls (med): Client implemented extensive remediation plan and has had clean internal control reports for years’ 2008 - 2012; however, numerous acquisitions increase the risk profile. Accounting Methodology (low): Client’s methodologies are in line with industry standards. Ratio analysis (med): Trend and industry comparisons raised no specific red flags; however, Client is experiencing competitive

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