CARROLLTON, Texas-Mobile-phone distributor CellStar Corp. owned up to its financial failings in China with an admission that its employees used unauthorized tactics to boost the company’s revenues and then hid those actions from the company’s auditors.
CellStar’s stock dropped more than 5 percent after its announcement to around 37 cents per share. CellStar previously said it would restate its earnings for 2000 to 2003 due to accounting issues in its Chinese operations. The company established an internal audit to figure out the details of its accounting woes.
CellStar said some of its employees in China booked sales of phones that had not been sold and deferred rebates to inflate revenues. “It was concluded that this failure was due to accounting errors and internal controls deficiencies,” the company said. CellStar recently fired two managers in its Asia-Pacific business.
