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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (5482)	1/31/2002 5:14:19 PM
From: hugh thorne	Read Replies (3) \| Respond to of 33421

JP. i don't want to highjack your great thread but i thought these rants needed a comment. RD, it seems pretty obvious that fraud was the fall of Enron. In that regards, the public accounting profession has tried to make it clear to the investing public that the procedures used during an audit are not designed to detect fraud. It has to be agreed that their promulgation of this fact has not been the best, none-the-less, it is still a fact of the audit process for the 20th century. If i remember correctly, the prior century did not audit under that premise. To take a guess at where the fraud arises, imo we may see that representations regarding the limit of liability to Enron of the mass of partnerships was mis-represented. That is, Enron likely represented that their losses were always restricted to their capital accounts balances. As such, whatever injections of cash and/or property were made to the partnerships was all Enron could loose. Simple concept, and frankly used by many public and private entities. History has shown that their liability was beyond their investments and they appear to be on the hook for more; assuming they realize on their assets. It will be interesting to see if people at A & A were involved in the fraud. If this proves to be true, it certainly is the first instance of this kind of involvement by the auditor that i can remember. That includes biggies like Penn Central etc. It will be considerably more expensive to audit under the presumption that fraud may exist. Further, regardless of the audit procedures, if a managment group are intent on fraudulently executing their stewardship function, i doubt any procedures will be successfull.