Amid increased federal scrutiny of corporate financial reports, Qwest Communications International Inc. Monday confirmed that it is the subject of a probe of its accounting practices.
The Denver-based telecommunication company received an "informal inquiry" from the U.S. Securities and Exchange Commission (SEC) asking it to turn over financial documents from 2000 and 2001, the company said in a statement Monday. The SEC is investigating three areas of Qwest's accounting policies and practices, the company said.
One area of the probe relates to how Qwest recognized revenue and accounted for sales of optical capacity. A second area of investigation relates to its sale of telecommunication equipment to customers who either purchased Internet services from Qwest or who received financing from the company.
The probe is the second against the company by the SEC this year, and it comes as the federal government is increasing its efforts to police accounting practices in the wake of major bankruptcies by Enron Corp. and Global Crossing Ltd. In early February, Qwest was subpoenaed to turn over documents relating to the purchase of some assets of Global Crossing.
Qwest intends to respond fully to the SEC's request, which came in the form of a letter Friday, the company said. The investigation is also preliminary and the company has not been found to have violated any laws, Qwest said in its statement.
Qwest defended its accounting practices Monday saying they "comply with all applicable requirements." However, "there can be no assurance that the SEC will agree," it said in the statement.