I think that this will be the inevitable result from the Enron/Andersen affair. Good for investors !!RegardsHarmyhttp://money.cnn.com/2002/02/01/investing/lashinsky/February 1, 2002: 6:22 p.m. ETWe made it through earnings season mostly unscathed. But the release of audited statements in coming weeks could lead to a world of hurt. By Adam LashinskySAN FRANCISCO (CNN/Money) - The disturbing question on everyone's mind these days has a frighteningly simple answer. Will there be another Enron? Yes, of course, there will be.The more tantalizing questions: Who will be next to crack, and when will we find out? The identity of the next Enron is tough to know. Short sellers will speculate, of course. But disasters like Enron tend to explode like bombshells, meaning that everyone but insiders will be surprised when the cataclysm occurs.The "when" is easier to discern. In coming weeks, as companies begin to file their 10-K annual reports with the Securities and Exchange Commission, the next wave of revelations will hit the market. It stands to be ugly. The reason lies in what auditors will force their clients to disclose in return for signing off on their annual reports."The interplay of the relationship between issuers (of stock) and auditors for every public company this year will occur under the cloud of Enron," says Boris Feldman, a litigator with the Silicon Valley law firm of Wilson Sonsini Goodrich & Roasati. "Every auditor in America is having a near-death experience," he says.With Enron's auditor Arthur Andersen in mind, no firm wants to find itself in similar straits. The result: "There will be either adjustments or restatements (to past year's results), or, more likely, a very high level of detail in the footnotes," Feldman.In other words, the public accounting firms, in order to cover their backsides, will make sure everything that might possibly need to be disclosed will be disclosed in this year's crop of 10-K's, which are required to filed by 90 days after the end of the fiscal year (that is, by March 31).Every off-balance-sheet deal, every nuance of financial engineering, every related-party transaction. Where once these references were vague, this year the descriptions will be specific. Anything less would expose the auditors.Don't be surprised to find that companies you thought had great earnings in years past -- supporting still-high P/E ratios -- confess that past results weren't so great after all.
Harmy. I would so love to think that we could ever get full and fair disclosure, but personally I doubt it, here or anywhere else for that matter.. Last year there were changes proposed to supposedly ensure some independence for auditors but, well. havn't heard any more about that! ( By the way, have you noticed how many ex auditors are sitting on the boards of companies they used to audit?) Warm and cuddly reationship that one -- The regulators don't care obviously, Nothing quite as chilling as corporate greed I've always thought ..
FCYes - we can but hope that downunder auditors are not as bad as some of the US ones obviously are.What do you reckon Barcoo ?? - have we got much to worry about down here ??RegardsHarmy
What do you reckon Barcoo ?? - have we got much to worry about down here ??Totally out of my league. I can give an opinion but it is speaking from only general feeling and no knowledge whatsoever.I would expect that the Australian auditors would be a lot more trustworthy than the auditors referred to in the US article. Doesn't mean they can't be duped though does it. eg HIH & Harris Scarfe.
Harmy, All this auditing stuff is over my head too, but the thing that worries everyone is auditor independance when non audit fees exceed by far the fees paid for actual audits. according to the ASA (once again) the non audit fees paid to the auditer of MAY exeeded 4million dollars, (audit fees 1.5 million..) We need to know if an auditor is in a position to blow whistles and ring bells if he finds irregularities. His firm stands to lose a lot of rich pickings if he speaks out doesnt it! Just another thing that the reglulators should have cleaned up years ago but never have. Best, FC.
""We need to know if an auditor is in a position to blow whistles and ring bells if he finds irregularities.His firm stands to lose a lot of rich pickings if he speaks outdoesnt it!""What's required is disclosure, not dissimilar to that of a financial planner that is now required.I believe most would be horrified how intertwined the business of auditing and consulting is today. I used to account manage the Big 6 (as they were back then), they thrive on "cross fertilisation" between practices / partnership to increase their yield per customer/account.Andersen's are the tip of the iceberg okay, remember that Deloittes got done with AWA (short memory?). Unfortunately, ASIC is about as toothless as they come. Are we really going to expect justice? Track record here says it all.Big 5 firms = Dracula looking after the blood bankRgdsR
Welcome to the board R and thanks for the input.Personally it appears to me as if ASIC is largely toothless by choice. Their powers are limited but they seem not to fully use the powers that they do have, especially when things are near the "too hard" basket.This could possibly change if they had a head kicker at the top. Maybe we could nominate Alan Fels?I find it amusing that the exposure of these rorts with auditors was highlighted by the Enron debacle. Enron as we all know is listed in the US which prides itself on having the most transparent disclosure laws in the game and "badmouths" other markets for not being "up with the game".
Hello 211, enjoyed your post,"ASIC is about as toothless as they come" I agree, underfunded as well--- suits all vested interests.. (helps to ensure toothlessness)) "Big 5 firms = Dracula looking after the blood bank" perfect description,!! I think if most of us outsiders knew the real situation we wouldn't sleep nights, let alone invest... Cheers. and Welcome from me as well. FC.
Barcoo, funny you should mention Alan Fels, I wish!! Best, FC.
Barcoo, funny you should mention Alan Fels,OK, I'll bite. Why is it funny Cassie?
Barcoo. Hey no, the funny thing is every time I see him on telly I think wouldn't he be great in the ASIC job, (we should be so lucky)! Sorry, it was my poor choice of words.. I agree with what you said. Cheers, FC.
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