Computer Sciences Corp. disclosed yesterday that it has agreed to settle an SEC enforcement action against it related to accounting errors in the company's FY 2009-2012 financial statements. Specifically, CSC stated, the accounting errors concerned the "Nordics region, Australia, and the Company’s contractual relationship with the U.K National Health Service (the “NHS”)."
The SEC advised CSC in January 2011 that it was investigating the company's accounting and disclosures, and CSC's Audit Committee launched its own independent investigation into these issues in May 2011. Following the Audit Committee's investigation, CSC acknowledged certain historic errors and irregularities in its accounting relating to the areas noted above and made "comprehensive enhancements" to its compliance, financial and disclosure controls, and to the function of internal audit.
According to CSC, these improvements included measures such as outsourcing many internal audit activities to Ernst & Young; creating an independent investigations unit to investigate suspected violations of the law or CSC's Code of Conduct; having the company's Chief Compliance and Ethics Officer report directly to the Audit Committee; and creating a new position of Chief Accounting Officer responsible for developing accounting policies and reviewing complex technical accounting issues.
CSC stated that under its agreement with the SEC, the SEC will file a settled administrative proceeding alleging violations of the antifraud, reporting, and books-and-records provisions of the federal securities laws. CSC stated that it will not admit nor deny the allegations, but will agree to a cease-and-desist order. CSC will also restate its financial statements for FY 2012 and its summary financial results for FY 2011 and FY 2010 to reflect that approximately $130 million of operating profit is no longer recognized in prior years.
CSC stated that it has also agreed to pay a penalty of $190 million as part of the settlement and implement a review of its compliance policies through an independent compliance consultant.