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To: Tunica Albuginea who wrote (55148)	6/23/2000 8:56:00 PM
From: Stcgg	Read Replies (1) \| Respond to of 99985

Current Account Deficit and the US Dollar.. Keep a watch in the weeks ahead - Chart of the Week.. investech.com >><<

To: Tunica Albuginea who wrote (55148)	6/24/2000 2:04:00 PM
From: Tunica Albuginea	Respond to of 99985

Dead fish starting to float. Lawyers sue Companies for fraudulent Annual reports: interactive.wsj.com Barron's JUNE 26, 2000 The SEC Versus CPAs; The GOP's Budget Disunity By Jim McTague If Mark Twain were alive today, no doubt he would amend his famous gibe about "lies, damned lies and statistics" to include "annual reports." Corporations and their auditors have become so fast and loose with their numbers that Chairman Arthur Levitt of the Securities and Exchange Commission openly frets about the accounting profession damaging its credibility with investors. And now legal bounty-hunters have found the blood trail. The Boston firm of Berman DeValerio & Pease last week announced six separate class actions on behalf of investors against publicly traded companies that have been accused of inflating their earnings with creative accounting. Jeffrey Block, one of the lawyers bringing the suits, estimates restatements by public companies during the past two years at close to 100. There have been so many high-profile reporting irregularities that the SEC recently took the unprecedented step of forming an in-house posse to go after outlaw accountants. Sheriff Levitt is intent on cleaning up the profession before he rides out of town after the presidential election. So Tuesday the SEC will take an additional step -- unveiling a proposal to toughen federal regulations intended to ensure auditor independence. The SEC hasn't tweaked the rules since 1983. That was a year after the spectacular failure of Penn Square Bank, which had received a squeaky-clean opinion from its auditor. This is not to suggest that the profession suddenly has tumbled from a lofty ethical perch. The past two decades have been punctuated by incidents of malfeasance within the profession, followed by Congressional outbursts and tearful promises by the profession to implement more stringent self-regulation. The inquiries began in the late 'Seventies with Senate hearings led by Montana Democrat Lee Metcalf. After his death, Democratic Sen. Tom Eagleton of Missouri picked up the ball. Democrat John Dingell of Michigan, during his tenure as House Commerce Committee chairman from 1981 to 1995, may have injured his own eardrums with the racket he made about accountants. What makes this latest cycle noteworthy is the sheer number of frauds, says lawyer Block, who has been specializing in securities-related class actions for the past 14 years. He says companies nowadays are under so much pressure to meet analysts' expectations, they start out with small lies about earnings and find themselves "on a slippery slope." The popularity of stock options as a performance incentive also is a contributing factor, he says. The SEC's suggested regulatory upgrades would be a big and bitter pill for the profession, accompanied by a spoonful of sugar. Let's begin with the bitter pill: Accounting firms would have to stop cross-selling some big-ticket consulting services to audit customers (tax advice would not be eliminated, but it would be subject to new safeguards). The proposal could have a significant impact on the bottom lines of bigger firms. As Levitt himself pointed out in a May 10 public spanking of the profession, auditing no longer dominates the practices of the largest firms: "It accounts for just 30% of total revenues -- down from 70% in 1977. Consulting and other management advisory services now represent over half-up from 12% in 1977. Since 1993, auditing revenues have been growing by 9% per year on average -- while consulting and similar services have been growing at a rate of 27% each year." He continued: "When an audit firm also keeps its clients' books, the principle of independence is undermined. And when some firms take on tax and other assignments where the size of the fee is based on the answer given, one has to wonder how such a practice is consistent with a culture that has long prided itself on objectivity." In general, the SEC allows accountants to set their own rules and standards, either through the independent Financial Accounting Standards Board or through ethics committees -- so long as the standards are impartial and in the public interest. Staffers at the SEC say the agency feels compelled to act now because it sees no general sense of outrage within the profession over the upsurge in reporting scandals, nor does the commission see any coordinated effort to address the problem. In one well-publicized incident, the profession refused an increase in funding for its ethics watchdog, the Public Oversight Board. Bad press on the episode forced the profession to reverse itself and loosen its purse strings. Two of the Big Five firms in the business, Ernst & Young and PricewaterhouseCoopers, have seen the handwriting on the wall and unhitched their consulting operations from their auditing wagons. Then again, there are firms that view consulting and other products as so crucial to their financial future, they are planning a showdown on the proposal. The SEC expects Arthur Andersen, Deloitte & Touche and KPMG to fight the measure on Capitol Hill. Now for the spoonful of sugar: The SEC will propose a rewrite of its stringent rules on stock ownership by partners and their family members. Currently, if the wife of a partner, for example, owns stock in a company the firm audits, the partner is in violation of the rules even if the partner is not directly involved in the auditing contract. It gets more complicated if, say, the spouse works for an audited firm and holds its stock in a retirement account. The accounting industry is not without its powerful friends on Capitol Hill. But look for Levitt to win the showdown. By siding with investor interests, he holds the high ground. ============================================== Message #55148 from Tunica Albuginea at Jun 23, 2000 8:12 PM ET Casaubon, we all know there is something fishy in Babylon. Soon the dead fish will start floating; one by one or in groups. A sight to see...............