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DXP Enterprises Questions Existence of Some Customer Contracts
Revenue recognition related control deficiency results in corrections to revenue in two consecutive years.
May 24, 2023
DXP Enterprises (DXPE), a distributor of maintenance, repair, and operating (MRO) products revealed a new control deficiency related to revenue recognition. While detailing previously disclosed control deficiencies in its latest quarterly report, DXP inserted new language signaling potential trouble with its product sales and service revenue streams:

“...controls were not designed and maintained to ensure the accuracy of the price and quantity, including the approval of credit memos, the existence of a customer contract, and appropriate cut-off during the revenue recognition process.”

The material weakness resulted in what DXP calls, “immaterial audit adjustments related to revenue and related contract assets and liabilities” during the years ended December 31, 2021 and 2022, and out-of-period adjustments related to revenue during the year ended December 31, 2022.

DXP also disclosed multiple control deficiencies related to the segregation of duties and not having enough employees with accounting expertise.
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