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Audit Boosts Xerox Results For 2000

By BridgeNews A review of Xerox Corp.'s books triggered by the copier maker's discovery of improper accounting in its Mexican arm revealed that the struggling business earned more than it thought last year. The audit, conducted by accountants from KPMG LLP, clears up months of uncertainty over whether the company's accounts contained problems beyond those Xerox discovered at its Mexican operation last June. The investigation forced Xerox to delay filing its 2000 Form 10-K, an annual report required by the Securities and Exchange Commission. "After rigorous reviews of Xerox's accounting, no fictitious transactions were found and the company's liquidity is not impacted," Paul A. Allaire, Xerox's chairman and CEO, said in a statement. "Xerox can now continue to focus on effectively executing its turnaround strategy, which remains on track." Xerox is in the process of selling $4 billion worth of assets and cutting costs by $1 billion in order to address financial problems that forced it to remind investors in October that it had access to plenty of cash, including $7 billion in revolving credit. The Stamford, Conn.-based company said in February that an investigation of Xerox Mexico revealed accounting irregularities including billing inaccuracies, ineffective collection of debts, and "inappropriate re-aging of past-due accounts." The company took a $120 million after-tax provision in 2000 to cover potential costs from the Mexican problems. In April, Xerox said that given the Mexican problems, and a Securities and Exchange Commission investigation of the issue, it and KPMG would launch a more thorough audit of its accounts than it had planned. The company said May 31 it had completed that investigation, making it possible for KPMG to sign off on its accounts for 2000. The audit found that while some of KPMG's accounting practices violated generally accepted accounting principles, the problems did not significantly affect revenue in 1998, 1999, or 2000. After the irregularities were corrected, Xerox's $384 million net loss for 2000 turned out to total only $257 million, $127 million less than the company originally reported. Net income for the first quarter of this year was about $50 million higher than the $158 million profit Xerox announced on Apr. 19. The adjustments also reduced shareholders' equity by $137 million.

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