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

To: hugh thorne who wrote (5484)	1/31/2002 5:50:29 PM
From: Raymond Duray	Read Replies (1) \| Respond to of 33421

JP, Thanks for your observation that my words constituted a rant. They most certainly did. And purposefully so. Because we need to collectively shake ourselves into some sort of sensibility about how far the capitalist system has run off the tracks. Re: it seems pretty obvious that fraud was the fall of Enron. Agreed about Enron. Additionally, fraud, hubris and collusion on the part of Artful Andersen and the 'Asleep at the Wheel' Regulators, like industry's lapdog, the FERC. Re: 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 Say what? I find that impossible to swallow. I've been audited, fraud was part of what my private company was examined for. How is it that Enron gets a free pass? How can a public company be audited to lower standards than a privately owned concern? That boggles my mind that you make this statement. Re: 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. And who was helping to structure these deals? My guess is that Andersen's consulting wing was joined at the hip with Enron's financial wizards to create these off-balance sheet illusions. Re: . 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. Good grief, so we are supposed to just throw up our hands and say future Enrons are unavoidable? That flies in the face of good sense. Clearly there is a huge conflict of interest in the accounting industry, attempting to both consult and audit. That abuse needs to stop. Furthermore, the efforts of the consultancies to subvert the spirit of FASB 140, the rules controlling unconsolidated partnerships, has got to be re-examined in the light of Andersen and Enron's callous chicanery. What they did may actually be legal. But it was clearly unethical in any "reasonable man" sense of the word. And in seeing what the results were for thousands of honest employees, I would say that it is immoral. You seem to say there's nothing we can do. I vociferously disagree with you on that. There's plenty of changes that can be made. Starting with providing proper regulation of the now discredited accounting industry, some of the best fiction writers of our age. -Ray

To: hugh thorne who wrote (5484)	1/31/2002 8:30:06 PM
From: Yorikke	Read Replies (2) \| Respond to of 33421

hugh, the statement: " 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." is one of those seemingly intelligent comments that borders on hilarious when looked at in greater detail. The point of an Audit is to determine the likelihood of honesty. Though you are correct that it would be very expensive to audit with the assumption of wrong doing, it is also a rule that Auditors are supposed to use statistical sampling to gauge the state of the firm. It has been revealed already that the Enron Auditors were aware of problems resulting from their investigations, and chose not to make an issue of them as they could be interpreted (under the thinnest of measures) as being within the bounds of Generally Accepted Accounting Principles. The facts are likely to reveal that the Audit staff was well aware of the problems. This is not a matter of missing the rare instance, it is a matter of choosing not to report matters that greatly effected the financial standing of the firm. And it seems likely that this attitude has pervaded the profession and become common in Audits. The link between consulting and Auditing being a major cause of the laxity. This was an issue 20 years ago, it was an issue 10 years ago. One only need go through the professional journals to see the occasional brave individual raising the issue. The fact is the accounting/audit profession sold out. If not individually then as a body and certainly with specific companies. . What has always been feared will now come to pass. And the consequences will be as severe as always whispered about. Federal Regulation will be imposed on a body, no longer even judged a profession (Auditors), that has proven it can not regulate itself and is not reliable enough to engage the public trust. And that's not a rant .....its the simple fact. Its what every accounting student over the past 30 years has learned was the eventual likelihood of not doing the Audit correctly.

To: hugh thorne who wrote (5484)	2/1/2002 2:54:44 PM
From: John Pitera	Read Replies (1) \| Respond to of 33421

Hi Hugh, no problem, here is a partial recap of posts on proforma and the quality of earning, I sent this partial list to a friend at a boutique firm who was asking about all of these EPS and accounting issues yesterday. ----------------- Here are a few good articles on Proforma earnings, which you requested. Message 16312029 word attachement is also included a for above link Message 16310956 word attachement 2 for above link Message 16267166 word attachement 3 for above link to Financial times article and by all means check out this url that I highlighted on my market lab thread This Withering Bear Valuation post by Carl Swelin, shows how richly valued the market still may be decisionpoint.com I've got some additional articles from Pimco's Bill Gross (biggest global bond manager) , Warren Buffett, Steven Roach Ed Yardeni on this topic. We've been discussing it actively all of this year. JP