Re: [CANSLIM] Another Andersen client

From: Warren Keuffel <wkeuffel@xmission.com>
Subject: Re: [CANSLIM] Another Andersen client
Date: Tue, 29 Jan 2002 10:19:41 -0700
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What ticks me off is that the new SEC chairman, Pitt, seems more 
interested in damage control and CYA efforts for the accounting firms 
than looking out for the interests of the investor.

Warren

Tom Worley wrote:

> Well said, Katherine, and now we introduce the new accounting 
> standards of disregarding goodwill unless impaired!
>
>  
>
> There are two issues for me:
>
> Conflict of interest - this applies to both accounting firms, and to 
> analysts. If the auditor does nothing but audit, at least this is 
> removed, and we only need worry about the competence. If an analyst's 
> compensation is fixed, and not tied to underwriting business brought 
> in, or commissions generated, then again the conflict is removed, at 
> least in part (he still has to worry about losing his job if he writes 
> an unfavorable report, and the client cans the brokerage house).
>
>  
>
> Safety of investing - it's one thing to assume the risks of the 
> market's whims and direction, and rely upon management to continue 
> running a good business. It's another to get slimed by underhanded 
> accounting practices that should have not only been stopped, but 
> reported by the auditors. Note that PSFT was forced to buy back their 
> wholly owned subsidiary they were using to hide developmental costs.
>
>  
>
> Auditors have great power, including the ability to write an opinion 
> expressing the viability of a "going concern". In the case of GX, last 
> audit (done less than a year ago but officially as of 12/31/00) was a 
> clean opinion. Technically, Andersen is in the clear because the 
> bankruptcy was filed over 12 months later. The bankruptcy filing 
> itself was no surprise, it has been known for some time that it would 
> happen. My concern is the apparent (but not yet proven) conflict of 
> interest.
>
>  
>
> In Enron's case, Andersen's income was split nearly equally between 
> auditing and consulting / non-audit services. In GX's case, it was a 
> 20/80 split in favor of consulting stuff. The SEC tried to ban 
> outright the combo of auditing / consulting, and the best they were 
> able to do was require reporting corps to disclose the fees they were 
> paying.
>
>  
>
> Corporate bankruptcy is the fault of management. I don't even give 
> tolerance for poor market conditions, because it is management's 
> responsibility to anticipate this happening, and adjust. It is not the 
> auditor's fault. But it is the auditor's responsibility to object to 
> improper or inaccurate accounting, and resist efforts to finds ways to 
> accommodate same. It is the auditor's responsibility to ensure that 
> the final 10K accurately and completely reports the state of the 
> company's financial condition. I don't think this was done by Andersen 
> with Enron, any more than it was done for Global Crossing, Sunbeam or 
> Wackenhut. I have seen auditors resign an account when they and 
> management could not agree on the final report. That at least gives 
> investors, and some analysts, a signal to dig deeper.
>
>  
>
> Tom Worley
> stkguru@netside.net <mailto:stkguru@netside.net>
> AIM: TexWorley
>
>     ----- Original Message -----
>
>     From: Katherine Malm <mailto:kmalm@earthlink.net>
>
>     To: canslim@lists.xmission.com <mailto:canslim@lists.xmission.com>
>
>     Sent: Monday, January 28, 2002 11:18 PM
>
>     Subject: Re: [CANSLIM] Another Andersen client
>
>
>     Mike, jans, Patrick,
>
>      
>
>     Thanks for an enjoyable exchange. If it can be this complicated
>     just *talking* about dereg, analysts, accounts, consultants, ENE,
>     and Anderson--then imagine how easy it is to muddy the financial
>     and political waters just enough so that *nobody* can figure out
>     what's really going on. I am reminded of the great Houdini.
>     Marvelous illusionist, very entertaining, lived a good
>     life---until someone sucker punched him when he wasn't paying
>     attention.
>
>      
>
>     Katherine
>
>         ----- Original Message -----
>
>         From: Mike Gibbons <mailto:mikegibbons@proactech.com>
>
>         To: canslim@lists.xmission.com
>         <mailto:canslim@lists.xmission.com>
>
>         Sent: Monday, January 28, 2002 10:15 PM
>
>         Subject: RE: [CANSLIM] Another Andersen client
>
>
>         Hans, I was adding amplification to Patrick Wahl's point about
>         industry
>         analyst's advice being unreliable. I was not blamimg
>         de-regulation for the
>         Enron debacle.
>
>         Aloha,
>
>         Mike Gibbons
>         Proactive Technologies, LLC
>         http://www.proactech.com
>
>
>         -----Original Message-----
>         From: owner-canslim@lists.xmission.com
>         <mailto:owner-canslim@lists.xmission.com>
>         [mailto:owner-canslim@lists.xmission.com]On Behalf Of
>         Spencer48@aol.com <mailto:Spencer48@aol.com>
>         Sent: Monday, January 28, 2002 5:33 PM
>         To: canslim@lists.xmission.com
>         <mailto:canslim@lists.xmission.com>
>         Subject: Re: [CANSLIM] Another Andersen client
>
>
>         Mike:
>
>              I'm not certain what you're saying here.  Is the
>         conclusion suppose to
>         be that deregulation and increased competition led to the
>         Enron debacle?
>         But, if so, and if  dereg began in the 70's, why did it take
>         30 years for a
>         financial catastrophe like this one to occur?  And if it
>         didn't take 30
>         years-what was the first one?
>
>              And does the go-go era of the 90's (stock market wise) evince
>         convincing
>         contrary evidence that dereg and increased competition in
>         commisssions is a
>         bad thing?
>
>              Moreover, I'd hazard that a lot of people including
>         corporate accounts
>         and investment bank officers lost money in Enron.  That's why
>         it plummeted
>         the way it did-because everyone was selling, and no one
>         (except perhaps
>         Anderson auditors, and certain officials in Enron) had any
>         idea-since the
>         losses were off the books-why.
>
>         jans
>
>
>
>
>         In a message dated 1/28/2002 9:36:18 PM Eastern Standard Time,
>         mikegibbons@proactech.com <mailto:mikegibbons@proactech.com>
>         writes:
>
>         << Yes, commissions were deregulated in the 70's and
>         competition and the
>          internet have driven them ever lower making the investment
>         banks dependant
>          on thier corporate instead of retail clients. An example of
>         the unintended
>          consequences of deregulation. Every silver lining has a cloud.
>           >>
>
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