Case 2.2 Dell Computer Corp.

Dell Computer Corporation

Evaluation of Client Business Risk

Mark S. Beasley · Frank A. Buckless · Steven M. Glover · Douglas F. Prawitt

[1] To provide experience with obtaining and reading

a form 10-K report.

[2] To provide experience with identifying information

relevant for assessing a client’s business risks.

[3] To provide experience with linking business

risks to audit implications.

[4] To provide experience linking an audit client’s

business risks to risks of material financial misstatement.

[5] To provide experience with writing a formal

business memorandum.

Instructional Objectives

KEY FACTS

ƒDell Computer Corporation (Dell) is a publicly traded company (NASDAQ) that had

2,042,291,533 shares of common stock outstanding with a trading price of $20.06 as of March

14, 2008.

ƒDell offers a broad range of product categories, including desktop PCs, servers and networking

products, storage, mobility products, software and peripherals, and service.

ƒDell’s products are sold in more than 170 countries and has manufacturing facilities in and

around Austin, Texas; Winston-Salem, North Carolina; Lebanon and Nashville, Tennessee;

Reno, Nevada; West Chester, Ohio; Miami, Florida; Limerick and Athlone, Ireland; Penang,

Malaysia; Xiamen, China; Hortolândia, Brazil; Chennai, India; and Lodz, Poland.

ƒDell’s net revenue for fiscal 2008 was $61.1 billion while net income was $2.9 billion. Revenues

are normally strongest in the second and third fiscal-year quarters.

ƒDell is required to have an annual audit pursuant to the 1934 Securities and Exchange Act.

ƒAn assumption stated in the case materials was that there were no material misstatements

detected during the prior year audit of Dell’s financial statements (February 1, 2008).

USE OF CASE

Many students will be uncomfortable with this case assignment if they have had no previous

experience analyzing a company’s business risk. This case assignment will provide students with

a...