Case 2.2 Dell Auditing

Topics: Balance sheet, Audit, Revenue Pages: 9 (733 words) Published: October 8, 2014

Dell case

According to the 10-K filed on 30/13/2012 on Dell’s website, the following data has been appeared on the fiscal 2012 financial statement. Sales: 62,071
Total Assets: 44,533
Net income: 3,492
Cash flows from operating activities: 5,527
Number of employee:
2012 109,400(106700 regular employee and 2,700 temporary employee) 2011 103,300(100,300 regular employee and 3,000 temporary employee) 39,900 located in USA and 66,800 in other countries

Dell’s products
Dell’s products can be separated by home and working sections. For personal clients Dell provide personal laptops, desktops, tablets and a sort of accessories. For enterprise and government users, Dell provide office equipment such as PCs, monitors, printers & electronics and Tablets. Workstations and services focus on servers, solutions and software.

Dell’s competitors
Competitors of Dell including Lenovo, Apple, Hewlett-Packard, Asus and so on.

Dell’s customers
Based on the advantages of stability and advanced technology, the main part of the customers of Dell are government, enterprise and different institutions. The other part of Dell’s customer is family and personal users which focus on PCs, laptops and personal data services.

Dell’s suppliers
Dell’s global strategy made a wide and lengthy supply chain. 95% of its suppliers with including AMD, Hitachi, Microsoft and Samsung has been disclosed on the website

How does Dell market and distribute its products?
For personal clients, Dell’s strategy is to customize its products in order to satisfy potential buyers’ requirement. One of the example is the Alienware Gaming PCs, which is designed and manufactured for high standard game player, Dell presented fashion appearance to attract teenagers and powerful performance to fulfill customers who is seeking perfect game experience. Products can be made for different functions and added distinguished accessories. To deal with the large orders from enterprises, government departments and institutions, Dell serves products and services with lower price and higher stability. Under this circumstances, customers will tend to choose Dell’s products constantly and may introduce them to other potential users.

What is Dell’s business strategy?
Dell is an obviously cost leadership company. Rely on the efficient supply chain, Dell gained superior price advantage. On the tablet and laptop market Dell has to face strong competition from Apple and Samsung but it was still the largest revenue contributor (31% according 10K) because the lower price in 2012. Dell also attempted on Alienware series to enter high performance PC market. Generally, the sources of Dell’s revenue was almost equally provided by enterprise solutions (46%) and services and Personal Client (54%).

What are critical business processes for Dell given its basic business strategy? Dell’s cost leadership strategy is mainly supported by its efficient supply chain management. Suppliers for Dell are globally and widely separated in different businesses. Based on the supply system, Dell could ensure lower accessory price and negotiation advantages. Outsource manufacturing and services decreased the inventory and financial risk, which is normally in high technology industry because of product replacement.

What accounting information is associated with the critical business processes and how does Dell measure up on that information? Cost of goods sold, inventory, account payable and revenues.

What accounting methods does Dell use to report the accounting information associated with critical business processes and what is the risk of material misstatement? Dell uses FIFO to report inventory and revenue is recognized on the moment of shipment. The amount of account receivable is almost half of the current asset which means the highly risk of income statement adjustment. Inventory has been kept in lower...
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