Accounting Industry Changes

Here are some of the changes in the accounting industry since the Enron debacle, and a description of how the problems arose in the first place.

But in how many instances can it be alleged that consulting got the better of auditing? The scandals paint a picture of company management getting the better of auditors who served at its will. "If you look at the studies on fraud," says Alan Anderson, a senior vice president at the American Institute of Certified Public Accountants, "90% of the time it was a function of management override."

For example, in the dispute over KPMG's auditing of Xerox (nyse: XRX – news – people ) in the late 1990s, the U.S. Securities and Exchange Commission alleges that the company disagreed with one audit partner and requested another.

This should never have happened. No one should be able to request another audit partner because the one who reviewed their statements found fault. It's good to see changes, althought I still think Sarbanes-Oxley is weak. The sad thing is that in 10 years people will have forgotten all this and we will be pushing the limits again.

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On a similar note, Mrs. Businesspundit, an auditor who is pursuing an MBA, is writing a paper on how companies manipulate EPS, for one of her classes. If she will let me, I'll post some good excerpts from it in a week or two when she is done.