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Accounting
This page considers financial reporting, auditing, expectations
and responsibilities.
It covers -
Particular
actors are discussed in more detail in the Information
Economy guide on this site.
introduction
We suggested earlier in this profile that blame
must be shared with private sector financial service providers,
in particular global groups such as Arthur Andersen that
had expanded from audit activity to embrace management
consulting and even legal advice.
Critics have noted the 'expectations gap', rediscovered
every decade. Investors appear to believe the accountants
are supposed to stop fraud. Accountants refuse to accept
that responsibility, arguing that their task is not to
suspect that management is lying but simply to make sure
that the data — whose accuracy is the responsibility
of boards and managers responsibility — is presented
in a manner consistent with accounting convention.
In the US the 'big five' - PricewaterhouseCoopers (US$2.2
billion turnover in 2000), KMPG (US$1.3bn), Deloitte Touche
Tohmatsu (US$1.2bn), Ernst&Young (US$1bn) and Arthur
Andersen (US$0.9bn) - were belatedly found wanting by
the SEC and other agencies. As noted on the preceding
page, Andersen appears to have made more money from providing
management advice to Enron than underpinning corporate
compliance through rigorous independent audit services.
Insights are provided by Inside Arthur Andersen: Shifting
Values, Unexpected Consequences (New York: Prentice
Hall 2003) by Susan Squires, Cynthia Smith, William Yeack
& Lorna McDougall, Paul Barry's Rich Kids (Sydney:
Bantam 2002), Maggie Mahar's Bull! A History of the
Boom, 1982-1999 (New York: HarperBusiness 2004),
Jean Gadrey's New Economy, New Myth (London:
Routledge 2003) and The Audit Society: Rituals of
Verification (Oxford: Oxford Uni Press 1997) by Michael
Power.
In retrospect agencies such as Australia's ASIC took too
positive a view of those they supposed to regulate. In
some cases, such as insurance sector regulation by the
Australian Prudential Regulation Authority (APRA) the
lack of will appears to have been compounded by lack of
expertise and resources, resulting in the HIH,
OneTel, Froggy.com and Enron debacles.
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