Something shady about it
Some of America?s top companies have been in the news for the wrong reasons, casting doubt on the integrity of big corporations and the professionalism of accounting firms that certify their books.india Updated: Jun 30, 2002 22:09 IST
Some of America’s top companies have been in the news for the wrong reasons, casting doubt on the integrity of big corporations and the professionalism of accounting firms that certify their books.
The happenings at Enron, and the details now popping up in respect of WorldCom, the telecom giant, and Xerox, the internationally known copier company, have sent shock-waves through the world’s financial markets. President George Bush has had to calm nerves by promising a clean-up, as demands are being raised for better laws and the prosecution of guilty corporate bosses.
It appears the corporate giants had cooked up figures, logging terrific profits to jack up share prices. Indeed, it is not even known how many listed companies have been fiddling their books. The black lists now circulating on Wall Street and in the City of London are raising questions whether the recent US boom was partly driven by accounting fudges. It is now clear, for instance, that WorldCom is actually saddled with a $ 30 billion debt, and has sacked 17,000 employees. If it goes bankrupt, companies worldwide will be hit. In India, VSNL will lose Rs 575 crore, owed to it by WorldCom for carrying its voice and mail traffic.
Since top American companies are global, stock markets everywhere are jittery. The dollar has crashed to a 28-month low against the euro. The US runs a trade deficit, and daily needs
$ 1.3 billion from overseas to balance its trade. With the dollar slipping, this task will become greater. If the US economy has to absorb a shock, world economies may be hit; especially so when US demand for overseas goods and services dip. Arthur Anderson did the accounts for Enron and WorldCom. Other big accounting companies are naturally also under the scanner. Experts believe US accounting laws are too detailed, and therefore easy to circumvent. Now the exercise is how to plug the holes and book the crooked. Obviously, it isn’t just China where figures are rigged.