|
||||
|
|
||||
|
|
I started out in the leasing industry as a consultant with Peat Marwick. To get my CPA I had to spend 500 hours with the auditing side of the business. I was lucky. I got to be an auditor for 500 hours and then got to go back to the consulting world. Although I counted inventory, sent out confirmations, looked at audit trails, analyzed inconsistencies, talked to management, and looked for unreported exposures, I never knew whether I was doing the right thing. On top of that I was constrained by the budget set by the client. If I needed 40 hours to do the job and the client only wanted to pay for 20, I charged 20 and worked 40. If someone lied to me, they probably got away with it. Who’s going to know the business better? Who knows where to hide things? Who knows what is right and wrong? Who knows all of the alternatives? Them or me? The $64 billion failure of Enron now has accountants, investment analysts, and Enron executives being questioned by the US Senate as if they were supposed to know something was going on. Internal company memos show that the board and the office of Chairman Kenneth Lay approved the off-the-books partnerships that ultimately led to Enron's fall. Twice the company waived its code of ethics to allow Enron's former CFO to head several of these partnerships. Revelations that AA was aware of the partnership structures, acted as both external and internal auditor and shredded documents have made even the most skeptical observers rethink what little faith they placed in accountants. There's even a joke among traders that the next great investment play will be shorting a basket of stocks audited by Andersen. A look back at the reports from stock analysts before the company's downfall makes clear that the stock analysts, supposedly highly qualified in corporate finance, didn't understand much of the way Enron earned its money and kept debt off its balance sheet. Worse, even after Enron's problems came to light, several analysts from top investment banks continued to recommend the stock while acknowledging the enigma had yet to be fully unraveled. For years, FASB has tried to get Corporate America to disclose more details on off-balance-sheet transactions. They have even tried to get Corporate America to put more financial transactions on the books. And every time they get too close, they call FASB, the Big 5 and the SEC and tell them to back off. Since Corporate America pays their bills, who do think calls the shots in the long run? And it's now known that the SEC gave Enron waivers from two regulations that would have prompted detailed financial disclosures. Corporate balance sheets increasingly look like those of financial institutions, with the use of derivatives, vendor financing loans, third-party equity stakes and stock options. Given these circumstances, can auditors really do their job? I don’t think so. |
|
||