Accountants Feel Andersen?s Pain (Jeff Hankins Publisher’s Note)

Arthur Andersen’s decision to lay off 7,000 workers and restructure isn’t surprising. Damage to the Big Five accounting firm resulting from the Enron scandal is irreparable.

The 99 percent of the Arthur Andersen partners who had nothing to do with the Enron account must be outraged with the developments, and I regularly hear accountants talking about the damage done to the overall profession. In fact, I tease accountant friends by telling them that their credibility level perhaps has dropped to the likes of journalists, lawyers and insurance salesmen.

Corporate accounting practices deserve more scrutiny, and the Enron scandal will prompt analysts and auditors not to accept corporate explanations of finances without deeper review. That’s not to say we still won’t be shielded from balance sheet and earnings monkey business.

In recent years, Acxiom Corp. and Fairfield Communities took heat in national business publications regarding their accounting practices. The questions focused on how and when the companies recorded revenue from long-term contracts. Each has done a better job explaining its practices since then, and Acxiom actually has changed some of its accounting procedures.

I’m convinced big investors — particularly fund managers — must accept much of the blame for the eagerness of public companies to work their books so creatively. The punishment they inflict on companies that miss so-called “analyst expectations” forces executives to be creative and aggressive with the numbers, lest they see stock prices plummet overnight. Naturally those executives also are motivated to push the envelope because of bonus targets and stock-option incentives.

We have to reach the point where we can again feel confident about corporate audits. It’s tough enough evaluating a company’s performance based on numbers we believe to be accurate.

* * *

Let’s audit Arkansas politics:

• State Treasurer Jimmie Lou Fisher could serve the Democratic Party well as token opposition to Gov. Mike Huckabee. Without much hope for unseating him, her role would be to weaken him in case he decides to take on U.S. Sen. Blanche Lincoln, D-Ark., in two years. The likable and well-known Fisher won’t have much of a record to blast, nor would she be expected to take bold stands. She’ll just deliver head-grabbing zingers that will give the governor fits.

• I can’t begin to define qualifications for secretary of state of Arkansas, so First Lady Janet Huckabee could handle the role as well as anybody. So much for thinking she is apolitical. (Heck, I never thought Hillary Clinton would actually run for the U.S. Senate in New York, let alone win.) With a Janet Huckabee victory, we’ll see just how far away from the Capitol she can move reserved parking spaces for the Little Rock media.

• The thought of enduring another Mike Ross-Jay Dickey congressional race in the Fourth District is sickening. Wasn’t one of those enough for a lifetime?

• The Republican Party seems to be letting state Sen. Mike Beebe, D-Searcy, coast to the Attorney General’s office. That says volumes about the fund-raising ability of Beebe. And except for Huckabee, the state GOP has the same dearth of strong candidates as the Democrats. A major statewide office with no serious challenger offered by the GOP?

* * *

A new company project has put me on the road across Arkansas to visit colleges and universities, prompting a number of recent observations including the following:

The rise in unemployment has increased enrollment at colleges statewide, but cutbacks in state funding resulting from lower tax revenues have put the squeeze on their ability to meet the demands of growth.

This is a sad picture. We desperately need a better educated work force to bring in better paying jobs, yet we can’t afford to properly fund institutions for the high demand for college education.

(Jeff Hankins can be reached via e-mail at [email protected].)