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Friday, March 15 | ||||
Turnaround Artists
Remember when Andersen paid $110 million for the Sunbeam settlement? (The only settlement larger than that paid by an accounting firm in a securities lawsuit was the $335 million to Cendant shareholders from Ernst & Young.) From the low in 1996 Sunbeam's stock price tripled in a year and a half. Investors clearly were mislead by the company's grossly overstated quarterly earnings reports. The accounting tricks pulled by Chainsaw Al and crew to create these earnings "surprises" included: building "cookie jar" reserves, channel stuffing, ploughing back warranty reserves, changing depreciation schedules, capitalizing advertising costs, reducing allowances for doubtful accounts, etc. These are precisely the things that the Independent Auditor is supposed to look for and insist are disclosed. Andersen's catastrophic audit failures didn't begin with Enron, but they certainly ended there: the firm is finished. |
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