The bug in the accounting at Computer Sciences

In their 10Q filing, Computer Sciences Corp. disclosed that it had found some accounting irregularities in their Nordic business unit. The issue amounts to a “material weakness” in internal controls over financial reporting. The company took a hit of $30 million to their Income Statement in their fiscal quarter two ended October 2. There is more to come, there will be another $40 million charged during the first half of FY2011. These charges were related to prior period but due to deficiencies in the internal control system were not discovered up until now.

The company said the charges reflect “accounting errors and the misapplication of internal accounting policies and U.S. GAAP, as well as from accounting irregularities in the Nordic region, principally affecting prepaid accounts and outsourcing contract costs.”

Computer Systems is developing a remediation plan, including replacement of certain managers, strengthening controllership responsibilities, improved monitoring controls and oversight, and increased discipline associated with account reconciliations. Hopefully the issues are only in their Nordic business unit and hopefully this one time charge will clear all such issues and there are no more waiting to be uncovered.