Enron isn't the first case in which its accounting has been faulted. Now, it may be tougher to win new business

By Joseph Weber, with Darnell Little, in Chicago, and David Henry and Louis Lavelle in New York

12/24/2001

BusinessWeek Page 30 (Copyright 2001 McGraw-Hill, Inc.)

Barely a year ago, Arthur Andersen LLP's new CEO, Joseph F. Berardino, told employees and clients in an inaugural message on the firm's Web site that he was looking forward to "terrific times" and more "robust achievement" at the 88-year-old firm. Today, he is in the biggest fight of his professional life in the wake of the Chapter 11 bankruptcy filing of Andersen's once high-flying audit and consulting client Enron Corp. on Dec. 2. And as the Houston energy company crashes and burns, Berardino may find himself struggling to keep the smallest of accounting's Big Five intact and independent after years of resisting the industry's merger mania.

AICPA

-- Anonymous, December 29, 2001

Answers

01/07/2002

Fortune Magazine Time Inc.

Features/ Accounting In Crisis

One Plus One Makes What? ; The accounting profession had a credibility problem before Enron. Now it has a crisis.

Jeremy Kahn

Where were the auditors? People ask that question after every corporate collapse, and lately they've been asking it with disturbing frequency. At Waste Management, Sunbeam, Rite Aid, Xerox, and Lucent, major accounting firms either missed or ignored serious problems. The number of public companies that have corrected or restated earnings since 1998 has doubled to 233, according to a study by Big Five accounting firm Arthur Andersen. Now, following the stunning bankruptcy of Andersen's own client Enron, that question--where were the auditors?--has become a deafening refrain. "I believe that there is a crisis of confidence in my profession," Andersen CEO Joseph Berardino told a congressional committee investigating Enron's collapse in mid-December. "Real change will be required to regain the public trust."

The American Institute of Certified Public Accountants (AICPA), the industry's professional association, points out that accountants examine the books of more than 15,000 public companies every year; they are accused of errors in just 0.1% of those audits. But oh, the price of those few failures. Lynn Turner, former chief accountant of the Securities and Exchange Commission, estimates that investors have lost more than $100 billion because of financial fraud and the accompanying earnings restatements since 1995.

AICPA

-- Anonymous, December 29, 2001