Problems emerge when a reserve becomes a "cookie jar" used to prop up a bad quarter or downplay a good one, Coenen says. "You can use those accounts to manipulate your results," she says.
Whatever the problem at Dell, it remains unclear who is to blame. Dell has said it uncovered "evidence of misconduct," but provided no details. CEO Kevin Rollins resigned in January; founder Michael Dell returned to run the company.
The company stopped filing quarterly reports with the SEC in June 2006. Since then it has released limited sales information via press release each quarter, but has stopped holding normal conference calls with analysts.
The silence puts Dell at risk of being delisted from the Nasdaq stock exchange. The Nasdaq must review any company that's not making its SEC filings at least once every 90 days. So far, it has only given Dell warnings. That's likely to continue, says Therese Pritchard, a securities lawyer at Bryan Cave who formerly worked for the SEC.
Wall Street and the SEC both understand that complicated accounting problems can take a long time to unravel, she says. Dell is likely reviewing years of transactions — perhaps tens of thousands of individual sales — to uncover what went wrong, she says.