CA execs asked to resign over accounting flap

Three senior executives at Computer Associates, including its CFO, have been asked to leave the company in an ongoing investigation over past accounting practices, CA announced Wednesday.

Three senior executives at Computer Associates, including its CFO, have been asked to leave the company in an ongoing investigation over past accounting practices, CA announced Wednesday.

Sanjay Kumar, CA’s chairman and CEO, requested the resignations in response to preliminary results from an internal investigation of the accounting issues. The results determined that CA booked revenue from some sales prematurely during its fiscal year ending March 31, 2000, CA said in a statement.

CA has received resignations from Ira Zar, chief financial officer; Lloyd Silverstein, senior vice president of finance; and David Rivard, vice president of finance. The three men oversaw the company’s sales accounting during the period in question.

An external search for a new CFO will begin immediately, the Islandia, N.Y., company said. Douglas Robinson, CA senior vice president of finance, will fill the position in the interim.

Kumar also released a letter to customers explaining the company’s actions and pledging to maintain the integrity of CA’s financial reporting. A PDF version is online.

CA has been facing two federal probes into its revenue recognition practices. The company also established an audit committee to investigate the matter internally, led by Walter Schuetze, a former chief accountant at the U.S. Securities and Exchange Commission.

The committee’s probe continues, but initial results revealed a number of software contracts in fiscal 2000 that “appear to have been signed after the end of the quarter in which revenues associated with such contracts had been recognized. Those revenues should have been recognized in the quarter in which the contract was signed,” Schuetze said in the statement.

The value of the contracts wasn’t disclosed. CA said it informed government investigators of its findings. Its audit committee will examine whether the company needs to restate past financial results.

The investigations concern accounting practices that were in place before CA adopted its current system for revenue recognition in October 2000, the company noted. The new system recognizes revenue monthly over the life of a contract and replaced its upfront recognition system.

CA also reaffirmed its previously stated financial targets for the quarter ended Sept. 30, 2003. It is due to report its results for the period on Oct. 22.

“Before firing the CFO and two other finance execs, CA was working desperately to recast its image with customers,” said Corey Ferengul, an analyst at Meta Group in Stamford, Conn. “Now, CA will be telling customers, ‘Now trust us with this mistake.’ This news will impact trust in the company from the market standpoint.”

(Computerworld’s Matt Hamblen contributed to this report.)