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Non-Tech : The ENRON Scandal -- Ignore unavailable to you. Want to Upgrade?

To: Baldur Fjvlnisson who wrote (2326)	2/4/2002 10:18:28 PM
From: Mephisto	Respond to of 5185

Rethinking accounting after the Enron debacle Boston Globe By D.C. Denison, 2/3/2002 Professor Jay Thibodeau was at the blackboard one afternoon last week, energetically charting basic accounting principles for students in his ''Fundamentals of Auditing'' course at Bentley College in Waltham. Early in the class, Thibodeau mapped two groups on the board: ''upper management'' and ''investors, creditors.'' He left a large expanse of gray between them. ''This is where accountancy comes into play,'' he said, pointing to the empty space between the two groups. ''Can the investors and creditors trust the numbers they are getting from upper management?'' Hey professor, a lot of people are asking that same question these days. The sudden collapse of the nation's seventh-largest company will naturally start people wondering about standards in corporate finance, conflicts of interest, and the role of ''accountancy.'' But at Bentley, which has trained generations of accountants (it was founded in 1917 as the Bentley College of Accounting and Finance), the questions are much bigger, much broader. Like whether the current business reporting model is just plain broken. Thibodeau thinks that it is. ''The accounting model we're working with now was developed for the industrial age,'' he told the class that afternoon. ''It worked for companies like U.S. Steel. It doesn't necessarily work for Enron.'' Specifically, Thibodeau says the current accounting model lacks standardized measures for many of the nonfinancial metrics that are commonly used in many information-age companies. And although Enron's business was energy, many of its accounting practices were borrowed from ''new economy'' companies. During the class, Thibodeau brought up the example of AOL. ''The number of customers, the number of new customers, the number of page views - those metrics are very important in the Internet sector,'' he said. ''Why not have a standardized measurement display of these nonfinancial performance measures?'' he asked as he paced in front of the class. ''These things can be measured, and audited.'' Thibodeau, in fact, is currently working on a research project with three colleagues that is studying the information used by sell-side financial analysts in making their buy-sell stock recommendations. Thibodeau says that they've already discovered that analysts appear to use ''massive'' amounts of information that is not independently audited. In some respects, Thibodeau's work is part of a larger movement that is attempting to expand the purview of accounting. Bentley's accountancy department, for example, now offers popular combo degrees in ''accounting and finance'' and ''accounting and computer science'' - to train students to better capture the new realities of business. And the entire accounting profession is still debating a broad study sponsored by the Financial Accounting Standards Board that urges an expansion of the standard financial model to include data and performance measurements that are not captured by traditional annual reports. Up to now, many businesses have fiercely, and successfully, resisted expanded reports. Thibodeau goaded the class to consider some reasons why: additional costs; fear of compromising competitive secrets; more data for litigious investors. But it didn't take much coaxing to determine why lobbyists for those objections may be losing their power. A student in the third row raised her hand and said just one word: ''Enron.'' ''As accountants, we measure. That's what we do,'' Thibodeau told his class that afternoon. Thanks to the Enron/Andersen debacle, Thibodeau and his students may soon be getting more data to measure. D.C. Denison can be reached by e-mail at denison@globe.com. This story ran on page E2 of the Boston Globe on 2/3/2002. © Copyright 2002 Globe Newspaper Company. [ Send this story to a friend