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Friday, 28 June, 2002, 14:25 GMT 15:25 UK
Who watches the watchers?
The consequent pressure on auditors and accountants - the guardians of a company's numbers - is intense.
The Securities and Exchange Commission has that dubious honour in the US, and it's no surprise that it is squirming under the spotlight.
Its chairman, Harvey Pitt, has accelerated proposals shaped post-Enron last year to institute a new oversight of the accountancy business.
On the table is a nine-person "Public Accountability Board", only three of whose members will be accountants, with the power to fine and censure transgressors.
The agency is in line for a 77%, $337m boost to its budget, rapidly approved by the House of Representatives on Wednesday.
He has also announced plans to make company bosses sign off personally on accounts, in an attempt to bar the "No-one told me" defence employed by executives at both Enron and WorldCom.
And the SEC has hurried to sue WorldCom for fraud, making sure, Mr Pitt said, that it is prohibited from indulging in an Enron-style paper shredding party.
Demanding a sworn report of how it came to announce that it had hidden $3.8bn in expenses, Mr Pitt told reporters that what had happened at WorldCom - "and we do not yet know all that has happened" - was an "outrage".
"What we also know we're looking at isn't a mistake, it's a fraud," he said.
And he resorted to a quote from the movie Network, where a TV anchorman loses the plot with the increasing trivialisation of his programme. "I'm mad as hell," Mr Pitt declared, "and I'm not going to take it any more."
Protesting too much
The cynical observer, however, might recall that the film in question was a tragedy, where the outburst made no practical difference at all.
And there are those who feel that Mr Pitt is protesting just a bit too loudly.
Organisations like Common Cause, a 200,000-member public ethics watchdog, note that before his appointment by President George W Bush in August 2001, Mr Pitt 's legal career had him working for all Big Five international accountants.
On top of that, his clients have included AOL Time Warner chief executive Steve Case, Dell Computers, Merrill Lynch - whose analysts' recommendations of stocks they thought were worthless earned the firm a $100m fine from New York Attorney General Eliot Spitzer - and disgraced insider dealer Ivan Boesky.
"That was his job," acknowledges Celia Wexler, Common Cause's senior policy analyst. "But now his only client should be the investing public, and he's not demonstrating that. He's seeming to indicate that he still sees the world through the lens of his former clients."
For one thing, she told BBC News Online, he was largely responsible for watering down rules proposed in 2000 and designed to distance accountancy from consulting - a key issue post-Enron.
And Mr Pitt's PAB proposals are - as she puts it - "the same old same old".
The accountants would still write their own standards, she says.
Indeed, Common Cause maintains that they've already written them. Mr Pitt consulted former clients in the numbers business when drawing up the PAB proposal - but not representatives of investors.
Congress moves in
When it comes to shaking up the number-crunching business, the SEC has some serious competition.
Senators have been queuing up to denounce WorldCom, its accountants, the SEC, financial professionals in general, and - depending on which side of the political fence they're on - the White House as well.
President Bush's "outrage" was apparent at the G8 meeting in Canada - a stark contrast to the administration's slow and evasive response to the Enron scandal.
"Someone needs to go to jail," said Senator Tom Daschle, the most senior Democrat in Washington DC.
And together with John McCain, a Republican senator and former presidential candidate, Democratic Senator Byron Dorgan blamed Mr Pitt and his minions outright.
"The SEC ought to hang its head in shame," he said.
The Senate has its own answer to the accounting farrago: a bill proposed by Paul Sarbanes, Maryland's senior senator, which is rather more rigorous than the SEC's ideas.
The only accountants on his board would be retired. As well as regulating auditors, it would cut off consulting work at the knees.
After all, his supporters argue, the use of auditing as little more than a loss leader to attract consulting business has been criticised as one of the root causes of the Enron con.
And most radical of all, this new body would take over control of accounting standards from the Financial Accounting Standards Board, the self-regulatory accountant's outfit, and the American Institute of Certified Public Accountants.
Common Cause has backed Senator Sarbanes' proposals in the past, but it now believes they have been seriously watered down in committee.
And even if they make it through the Senate unscathed, reconciling it with the House of Representatives' much weaker version is likely to emasculate it still further.
The Big Five accounting firms, after all, paid over $27m to members of Congress in the 10 years to 2001.
Rules vs substance
Even so, the Sarbanes proposals to remove accountants' control over auditing standards scare the accounting profession.
This is because despite being almost unimaginably voluminous, the US's accounting rules - Generally Accepted Accounting Practices (GAAP), as they're called - are also rather less onerous in important respects than their European counterparts.
In the UK, auditors have to sign off on the accounts being a "true and fair picture" of a company's situation, and have leave to bend a rule or two if it produces an accurate picture.
Rather than this "substance-based" approach, says David Cairns, consultant and former member of the International Accounting Standards Board, US auditing is rules-based.
GAAP lays down the law for almost every eventuality - and auditors are commanded to follow them to the letter.
But as long as they dot the i's and cross the t's, they're legally unchallengeable.
The WorldCom case, Mr Cairns says, provides graphic evidence that this is not enough.
"I find it extremely difficult to see how Andersen could miss a $3bn error," he said.
"There should have been two warning bells. Firstly, they should - although they usually don't these days - check that claimed assets actually exist.
"Secondly, a CFO putting through his own entries that reclassify items should instantly put them on alert."
The upshot is that auditors simply aren't doing as much work as they should.
"I'm disappointed it's Andersen this time," Mr Cairns says. "It could easily have been any of the Big Five, but now it looks like a rotten apple rather than a systemic problem."
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