Xerox — A Carbon Copy Accounting Scandal
	found on: CNN.com written by onnel, edited by Amanda (Plastic) [ read unedited ] posted Fri 28 Jun 8:01am
		"And the next big accounting scandal rolls in not a week after WorldCom," onnel writes, ominously. "CNN is reporting that Xerox incorrectly booked close to $6 billion in revenue over the past five years. Although Xerox had already been found to have improperly reported revenue, the $6 billion figure is almost double the previously expected amount. Although this scandal probably won't have the same economic effect as Enron and WorldCom by itself, it does seem to add weight to the notion that the economic system in America is far more rotten than anyone thought 6 months ago. Captalism as we know it takes another hit and still we don't know when it will end. While it is impossible to have the perfect flow of information ideal for capitalism, lately it seems as if the flow of honest information has dried up completely. Whether the pressure for ever increasing profits in the late nineties is to blame or it's the fault of executive being rewarded mostly in stock (and therefore having a deeply vested interest in high stock prices), is there anything that can be done to revive a semblance of Adam Smith's free market?"

	Meanwhile, PerryStroika elaborates on the WorldCom aftermath: "It appears that the WorldCom's massive financial restatement is already having repercussions in Washington. The House Energy and Commerce Committee is already planning public hearings on a scandal, while Senate Leaders have indicated that they will intensify their push for new laws to reform accounting standards that will likely pass with a great deal of bipartisan support. Unsurprisingly, both parties have also rapidly included the scandal in their respective political calculations. WorldCom contributed big money to a lot of politicians but more to Republicans, a fact that many Democrats are only too eager to point out." Akio adds "Arthur Andersen is breathing a sigh of relief: KPMG was the accounting firm responsible for the multibillion dollar oversight," but notes that KPMG also recently acquired a number of Andersen consulting groups and employees.

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show almost all: 60 commentsbest: 10 comments by oldest first (ignore threads) newest first highest scores first oldest first newest first (ignore threads)

1.  Thanks for the Money, Suckers!   by Anonymous Idiot       at Fri 28 Jun 8:19am score of 1 obnoxious     Ah, the 401(k) - key to a golden retirement. All those rubes with their 401(k) money running to the stock market, each one dreaming of retiring with millions. Did you figure it out yet, people? The whole thing was a shuck to get you to put money in the stock market so that people like the CEOs of Enron, WorldCom and Xerox could steal it. Now THEY get to retire with BILLIONS. You get squat. Come on, didn't it occur to any of you that you couldn't ALL be millionaires? Stupid is as stupid does.   [ ...reply just to this | comment on the story... | next new ]

2.  Re: Thanks for the Money, Suckers!   by waldeaux       at Fri 28 Jun 8:32am score of 1.5 nuanced   in reply to comment 1     Well, that's overly simplistic. The GDP of the US has risen steadily (more or less) over time. That suggests that long-term investment will pay off. What's happening here is that people are putting in $$$ for short-term speculation and the profits are being skimmed off by a select few. As the equations are re-evaluated on the short-term, variance increases sharply which eventually affects behavior on longer time-scales. Now, what this means at 10, 20, or 50 years is anyone's guess. Almost certainly someone who has been throwing tons of $$$ at the stock market expecting to retire soon afterwards is screwed. On the other hand, people investing a bit at a time to retire in 30 years might do OK, at least better than stuffing it all in a shoebox in the bedroom closet. However, I can recall at one point in 2001, my 401(k) was losing value faster than the rate I was putting money into it! I would've had MORE money if I HAD been using that shoebox! At least I won't have to pay taxes on the lost $$$. Life is a peanut butter and liverwurst sandwich --- Me, 1977   [ ...reply just to this | comment on the story... | next new ]   37.  Re: Thanks for the Money, Suckers!   by ksu93       at Fri 28 Jun 2:29pm score of 1 astute   in reply to comment 1     Giving up on the stock market because of one downturn and a handful of corporate scandals is like giving up on democracy because the Justice Department has violated some people's constitutional rights and the Supreme Court has made a few bad decisions. If the stock market fails to increase in value dramatically over the next 35 years, low stock prices will be the least of our concerns because obviously something else will have gone terribly wrong if that's the case. "War is God's way of teaching Americans geography." -Ambrose Bierce   [ ...reply just to this | comment on the story... | next new ]

3.  Dangerous New Trend   by chatsubo       at Fri 28 Jun 8:33am score of 1.5 funny     You've heard of those primitive cultures whose's numbering system just consists of One, Two, er..more than two? I've got a horrible feeling that some management guru picked up on it and taught it to Andersen, who have spread it across corporate America. Every man is guilty of all the good he did not do   [ ...reply just to this | comment on the story... | next new ]

15.  Re: Dangerous New Trend   by Considered Harmful       at Fri 28 Jun 10:11am score of 1.5 clever   in reply to comment 3     The way things are going, "less than none" will soon be a more useful accounting concept than "more than two".   [ ...reply just to this | comment on the story... | next new ]

4.  The root of all evils in accounting   by petrilli       at Fri 28 Jun 8:37am score of 5 brilliant     I first noticed this when I worked for Apple back in the K-12 group in Austin, TX. In the last few days of the month, there was always a pressure to get customers to commit on the 30th of May, rather than the 1st of June. It got substantially worse at the end of the quarter, and unimaginable at the end of the fiscal year. Why? Simply so we could "make the numbers" that Wall Street expected. We'd rob from tomorrow to pay for today. The problem with this scenario is that all you're doing is shifting money back and forth, and not actually creating new sales. Unfortunately, Wall Street has created this monster to some extent. Rather than reward companies for accurately forecasting achievable, sustainable, measurable results, they are pressured to always hit 10, 20, 30% growth rates---numbers which any real economist will tell you are not achievable for any extended period of time without major problems cropping up. What's wrong with a $10B company only growing by 5% annual? Perhaps they're in a market that isn't going to grow more than 2%. There is, in the end, only so much business to be transacted in the world, and everyone can't grow at 20%... someone has to shrink for someone else to gain market-share. Instead of this absurd notion of skyrocketing growth, we need to accept a more normal pattern to value, and reward companies who actually manage the return on investment, rather than "growth at all costs." There's a reason that read the entire comment...   [ ...reply just to this | comment on the story... | next new ]

22.  goddamn boomers   by Akio       at Fri 28 Jun 11:17am score of 1   in reply to comment 4     What's wrong with a $10B company only growing by 5% annual? Perhaps they're in a market that isn't going to grow more than 2%. There is, in the end, only so much business to be transacted in the world, and everyone can't grow at 20%... someone has to shrink for someone else to gain market-share. Problem is, Joe Boomer is looking at the numbers and thinking how the hell is he going to support his current bloated lifestyle after retirement if his 401k stocks are only averaging 5% annual growth? So he lumps his cash in high-growth stocks, meaning the 5% stock companies wither on the vine. Fortunately, there is a god, and much of what Joe Boomer bought a couple years ago (pets.com, Iomega, Amazon) is now worthless. The market doesn't want company stocks that barely keep up with inflation. The market wants stocks that pee in inflations face and tells it it's raining. Like Patton said, "Americans love a winner and will not tolerate a loser." At least, that's what he said in the movie. monkeyrotica.com: "It's like when they opened the Ark of the Covenant. Except with monkeys."   [ ...reply just to this | comment on the story... | next new ]   30.  Re: goddamn boomers   by astrogirl       at Fri 28 Jun 11:57am score of 2 astute   in reply to comment 22     While I delight in the failure of people who are too dumb to read financial statements or recognize a tulip craze when they see one, rest assured, we (Xers) will be punished for this, not the boomers. Who do you think is going to bail these fuckers out when they need more Medicare and Social Security because their private sector investments failed to turn out as expected? You only get one guess. ;) And if I am elected I promise the formation of a new party, a third party, the Wild Party!   [ ...reply just to this | comment on the story... | next new ]   32.  Re: goddamn boomers   by Akio       at Fri 28 Jun 12:07pm score of 1.5 funny   in reply to comment 30     There's an article in the latest Business magazine where the author predicts continued economic growth for the next 10-20 years, essentially to meet the demands of aging/retiring boomers. Apparently, boomer goods/service consumption (as shown over the past 5 years)increases as they age. Somebody has to sell them their Depends, Ensure, limegreen up-to-the-armpits slacks, and timeshare condos. As for bailing them out, I'm really hoping for a comeback of the old Native American custom of putting the elderly on canoes and sending them down the river. Then I can invest heavily in canoes and make...a killing! monkeyrotica.com: "It's like when they opened the Ark of the Covenant. Except with monkeys."   [ ...reply just to this | comment on the story... | next new ]   44.  'Course, I always heard...   by scareduck       at Fri 28 Jun 3:53pm score of 1   in reply to comment 32     ... that it was Eskimos who put their unmanageable elderly on an ice floe. But now with global warming, wouldn't you just know that option's scotched! We're smarter individually. -- Larry Niven   [ ...reply just to this | comment on the story... | next new ]   57.  Yes, but.....   by rickcolosimo       at Sat 29 Jun 9:20am score of 1.5 compelling   in reply to comment 30     Well, I agree that we're going to pay, but at least two of the folks going on Social Security in the next 10 years are my parents. They're real boomers, born just after WWII. My 38-yo cousin, born in '64, is definitely not a boomer (no matter what that stupid definition says), and he's a little too old to be an X'er, which is what I guess I am ('68). Maybe it's that middle unnamed group that's really the problem. So, since I still owe my parents for an assload of comics, quarters for arcade games, two car accidents, one college education, and a pretty decent abuse-free childhood, I'll suck it up. As long as your parents don't get too greedy. Heck, I'd be embarrassed if I don't make enough to support them well on top of everything else.   [ ...reply just to this | comment on the story... | next new ]

5.  Is there a web site for all this?   by gparizot       at Fri 28 Jun 9:36am score of 1.5 funny     I'm sorry, but I'm having trouble keeping up with all of these accounting scandals. It's just like suicide bombers in Israel. "Did I already hear about this one?" I find myself asking. Is there a convenient website listing date and basics of the latest scandal, for those of us who are too busy and on the go to notice that all of our money has disappeared? Thanks in advance. Now, back to "Friends". "Just 'cause you feel it doesn't mean it's there" - Radiohead   [ ...reply just to this | comment on the story... | next new ]

21.  Re: Is there a web site for all this?   by DJGilmore       at Fri 28 Jun 10:36am score of 1   in reply to comment 5     Actually, there i read the entire comment...   [ ...reply just to this | comment on the story... | next new ]

6.  It's OK if Xerox shreds their documents...   by elforman       at Fri 28 Jun 9:39am score of 1.5 witty     ...since they've probably got copies laying around! Get it? Copies! They're Xerox, they make copies! Damn this is sad. Despite the claim of bipartisan effort to revise the accounting laws, why do I feel exemptions for pet industries (cough*oil*cough) will start cropping up in the various bills?   [ ...reply just to this | comment on the story... | next new ]

35.  Re: It's OK if Xerox shreds their documents...   by Bearpaw       at Fri 28 Jun 12:57pm score of 1   in reply to comment 6     Despite the claim of bipartisan effort to revise the accounting laws, why do I feel exemptions for pet industries (cough*oil*cough) will start cropping up in the various bills? Well, obviously. Oil companies are necessary for bribes, er, campaign contributions, um, I mean, they're an industry vital to our National Security . You don't want to put our National Security at risk, huh, do ya? Proud member of the reality-based minority.   [ ...reply just to this | comment on the story... | next new ]

7.  bitten in the ass   by Bocephus       at Fri 28 Jun 9:40am score of 2 brilliant     I've said it before and I'll say it again: if anyone had bothered to read a lot of these companies' balance sheets and income statements with any scrutiny, they would have known how much bullshit they were being fed. At my job, I have to read reams and reams of investment banks' glossy brochures and reports. I have learned to ignore the pretty colors and vapid praise of the early sections and head straight for the meat--the companies' earnings, cash flow statements, and balance sheets. Oftentimes these are predicated on assumptions so ridiculous (market risk premium of 3.5%? 25% annualized growth in a sector that's growing only one percentage point faster than GDP?) that anyone who passed junior high math will understand that it's bullshit. Unfortunately, we were all greedy then, and we were willing to believe what companies were telling us as long as their shares kept screaming upward. Nobody likes a party-pooper, and contrarian analysts and investors were shunned. (Warren Buffett was mocked by tech gurus for only averaging 13% returns during 1995-1999.) But, the difference is, your greed won't really bite you in the ass that hard if you're incredibly wealthy to begin with. The investment firms (mine included) that are still making money are the ones who saw through the crap and, like Buffett, hung with ugly shares while everyone was jizzing themselves over tech stocks and telecoms. insert Fight Club quote here to demonstrate Freethinking and Nonconformity   [ ...reply just to this | comment on the story... | next new ]

8.  Not quite $6 billion   by astrogirl       at Fri 28 Jun 9:43am score of 2 astute     per CNN: Xerox said that it reversed a total of $6.4 billion of previously recorded equipment sale revenue, but it was able to offset that with $5.1 billion of revenue that has been "recognized and reported during the same period as service, rental, document outsourcing and fi read the entire comment...   [ ...reply just to this | comment on the story... | next new ]

10.  Re: Not quite $6 billion   by onnel       at Fri 28 Jun 9:53am score of 1   in reply to comment 8     Actually, the correction in those sales was indeed $6.4. You were correct about the total loss (which they offset through the other revenue). The misstated revenue was indeed to the tune of over $6 billion, though. Offsetting this money that never existed with money that apparently did exist in no way minimizes the severity of what they did in falsely reporting earnings and where those earnings were coming from. Onnel -- I'm not a thief. I'm a peeping tom.   [ ...reply just to this | comment on the story... | next new ]   16.  Re: Not quite $6 billion   by astrogirl       at Fri 28 Jun 10:15am score of 1   in reply to comment 10     My main point is not that you got it wrong, but that this is not going to be a big deal for Xerox. Xerox was messing with periodicity with a net result of a mis-statement over the period examined of less than $2 billion. This will not take down Xerox -- not by a long-shot. This might take down WorldCom. To put it in perspective, per Reuters: "Revenues for 1997-2001 have been reduced by 2 percent to $91 billion." And if I am elected I promise the formation of a new party, a third party, the Wild Party!   [ ...reply just to this | comment on the story... | next new ]   38.  Re: Not quite $6 billion   by onnel       at Fri 28 Jun 2:40pm score of 1   in reply to comment 16     Right, I totally agree with you. I think it's a big issue because it's yet another case of a major corporation lying to the public and investors in a huge way. You are completely right that it won't tank Xerox like it has the other companies. Onnel -- I'm not a thief. I'm a peeping tom.   [ ...reply just to this | comment on the story... | next new ]   24.  Calling all lawyers!   by Akio       at Fri 28 Jun 11:25am score of 1 brilliant   in reply to comment 8     The only way to punish the liars is to PUT SOME PEOPLE IN JAIL. Actually, I wish some clever lawyer would make the case that such massive fraud threatens the stability of the Nation's economy and in our current war state, is tantamount to treason. See, then we could have the Attorney General sweep in, suspend habeas corpus, hold the board of directors incommunicado, put these guys in front of a military tribunal, and execute them as "economic combatants." But then, some other clever lawyer would convince the tribunal that the executives responsible were in fact retarded, and exempt from the death penalty. Sigh. monkeyrotica.com: "It's like when they opened the Ark of the Covenant. Except with monkeys."   [ ...reply just to this | comment on the story... | next new ]   26.  You go girl   by GodSpiral       at Fri 28 Jun 11:46am score of 1   in reply to comment 8     The only way to punish the liars is to PUT SOME PEOPLE IN JAIL. Fines simply reduce shareholder value and punish the people regulators are supposed to protect. You're absolutely right! Punishing management is essential, and employees are the only ones deserving punishment. There is an economic/political perspective of law enforcement that frowns on imprisoning the rich because the rich theoretically support the nation's tax base. Management is not that hard to replace, and the need to keep the rest of them in line, is well worth it to society, to sacrifice the "fine social contributors" that mismanaged Enron by throwing them in jail for a long time. The other alternative is fines against management instead of against the company. All Calculating American Satanists are Evangelical Christians   [ ...reply just to this | comment on the story... | next new ]   29.  Re: You go girl   by PerryStroika       at Fri 28 Jun 11:56am score of 1   in reply to comment 26     "Punishing management is essential, and employees are the only ones deserving punishment." Auditors and board members should also be held responsible, at very least for incompetence. They're supposed to be looking out for shareholders, and hell, they're supposed to be keeping an eye on management. Mouthpiece   [ ...reply just to this | comment on the story... | next new ]   60.  Re: You go girl   by slippytoad       at Mon 1 Jul 7:55am score of 1   in reply to comment 26     and employees are the only ones deserving punishment Evidently that point has been made, as WorldCom for one has laid off 17,000 employees to cover for the mistakes of their fuck-off management. If I were a fuck-off executive, however, I wouldn't necessarily want 17,000 people cursing my name as they wandered the streets in search of work. Apparently that logic doesn't occur to people in the fuck-off executive world, however. Woohoo!!!!! FUCK YEAH!   [ ...reply just to this | comment on the story... | next new ]   33.  Re: You go girl   by Marbleized       at Fri 28 Jun 12:22pm score of 1   in reply to comment 29     Auditors and board members should also be held responsible, at very least for incompetence. They're supposed to be looking out for shareholders, and hell, they're supposed to be keeping an eye on management. Of course, the board members are management at some other Fortune 500 company. You scratch my back, I'll scratch yours.   [ ...reply just to this | comment on the story... | next new ]   53.  Re: Not quite $6 billion   by Violator       at Sat 29 Jun 1:02am score of 1   in reply to comment 8     All this does is punish the shareholders...the same people that Xerox already misled We should not think of shareholders as being, in totalia, a horde of several million grey-haired retirees who are living off granola and rice crackers in Florida. Likely as not, the shareholders of Xerox are other corporations, investment brokered mutualised funds, trusts, and the super-wealthy...the people who actually own actual xerox shares would amount to a piddlingly small percentage of that. While the ten million dollar fine seems like big biscuits to you or I, Xerox will just swagger off to the bank and plug that figure into their overdraft facility and wipe one, lonely, bead of swat off their brow. The real damage to investors will be in the share price. The share price will plummet, wiping out billions in net equity. Oh, sorry, I should say "equity". However, considering the size of the players in the Xerox pie, these guys will wither weather the short term flak, or sell up early and buy in late and make a killing off the speculation. I doubt that if Xerox does not go down, anyone real will be adversely affected. Merely a bunch of fat cats who are probably so busy hiding their own bad book keeping they won't care about losing a ten percent stake in six billion or six million as opposed to that ten billion they themselves stashed under the rug last financial year... Consistently modded down for being an asshole since 2003   [ ...reply just to this | comment on the story... | next new ]

9.  And the Market Yawns...   by astrogirl       at Fri 28 Jun 9:49am score of 1     "Although this scandal probably won't have the same economic effect as Enron and WorldCom..." Which is what exactly? The market is up for the week, in spite of WorldCom. Investors seem to see a buying opportunity here, not a cavalcade of scandals about bullshit earnings at supposedly stable companies. On Wednesday morning before the open, I flipped through the financial shows. Analysts were sweating -- some were expecting a 500 point market drop because of WorldCom. The Commerce Department then came to the rescue with that restated 6.1% GDP growth number. If the economy GREW, then everything must be OK! GAH! And if I am elected I promise the formation of a new party, a third party, the Wild Party!   [ ...reply just to this | comment on the story... | next new ]

12.  Re: And the Market Yawns...   by PerryStroika       at Fri 28 Jun 10:04am score of 1   in reply to comment 9     "Which is what exactly? The market is up for the week, in spite of WorldCom." The market has already priced accounting problems into the picture. WorldCom has apparently just confirmed what they knew or suspected. Mouthpiece   [ ...reply just to this | comment on the story... | next new ]   45.  Moving GDP   by squeaktoy2000       at Fri 28 Jun 3:59pm score of 1   in reply to comment 9     Before this latest version of the GDP it was previously quoted as 5.8% then 5.4% and now finally 6.1%. Ummm..... Well, regardless of how the government is inflating its "stock price", much of that growth came from re-stocking inventories. Those inventories were depleted during the last part of last year as companies were scaling down and looking forward to a nice yucky economy for the next couple years. True, it's not an official recession, but particular areas of the economy are dealing with especially high unemployment. I know people who've been out of work so long that they've gone through their six months of unemployment insurance and they're no longer counted by their EDD as unemployed. -Despite it all, I'll pity them the day they realize.   [ ...reply just to this | comment on the story... | next new ]

11.  This is getting out of control.   by LJ Gould       at Fri 28 Jun 9:59am score of 3.5 clever     At least according to this article in the Globe and Mail, the accounting frauds are getting to the point that the overstatement of funds was enough to seriously cook the productivity numbers and economic growth indicators that the Fed and other institutions use to monitor the economy, and may even have been enough to make a recession look like a period of growth to the powers that be. If these frauds really were serious enough to screw with the macro-economic indicators ot the United States, that would have effected decisions about government spending, tax policy, interest rates and host of other activies. If those decisions were based on the wrong numbers, there's no telling what kind of unwitting damage they could do. The U.S. Government has recently returned to budget deficits, but it's economic forecasts were made with data that counted WorldCom's $3.9 Billion and Xerox's $6 Billion as Capital Spending. $10 billion dollars is still peanuts, but think about the cumulative effect this will have on their predictions. read the entire comment...   [ ...reply just to this | comment on the story... | next new ]

17.  Re: This is getting out of control.   by astrogirl       at Fri 28 Jun 10:24am score of 1   in reply to comment 11     Thanks for that link! I was trying to draw some of those conclusions myself, and they've already done the work. One might also want to look at how much of that 6.1% is military build-up and therefore non-recurring. Detailed GDP numbers are available read the entire comment...   [ ...reply just to this | comment on the story... | next new ]

13.  A little perspective   by petiex       at Fri 28 Jun 10:04am score of 3.5 witty     In order to make six billion dollars, you would have to make sixty million double-sided Xeroxes of a hundred dollar bill. With the cost of color copies, that can really add up. "Astute and Helpful Bear." - Owl   [ ...reply just to this | comment on the story... | next new ]

14.  Burton Malkiel   by Vlad       at Fri 28 Jun 10:10am score of 2.5 nuanced     makes some valid points in today's WSJ(6/28): There is no way one can legislate accounting standards and there is no way to fix generally accepted accounting principles so that full transparency is assured. But perhaps the most useful thing we can do is to accept the suggestion of Treasury Secretary Paul O'Neill that CEOs should personally vouch for the veracity and fairness of their company's financial statements. Perhaps the independent chair of the firm's audit committee should sign the statement as well. If the firm's statements later prove to be misleading, the CEO should be held criminally liable. karma is for blathering, pseudo-intellectual pussies.   [ ...reply just to this | comment on the story... | next new ]

18.  Re: Burton Malkiel   by alaffin       at Fri 28 Jun 10:29am score of 1   in reply to comment 14     I really believe that the only way to get this to stop is to send the heads of both the accounting firm and the corporation as well as all of the parties directly involved to jail and fine them heavily enough that there would be no profit motive. I would also think that setting up incentives for whistle blowers similar to those in place for government contracts and tax evaders might help some. The only way to get some people's attention is to grab them by the wallets and squeeze. satire   [ ...reply just to this | comment on the story... | next new ]   40.  Re: Burton Malkiel   by Sigivald       at Fri 28 Jun 2:53pm score of 1   in reply to comment 18     I'm not sure that's automatically just. The head of the accounting firm may very well just not know what his subordinates are doing for each client; with a large firm, I don't think there's any way he humanly could. And holding someone criminally responsible for an employee's actions, when the employee was not acting on his instructions, is... unjust. People should go to jail, and they should be the people who made the decisions to commit fraud... but not automatically the head of the company, if there's no reason to think s/he was complicit. Whistleblower protection should ensure that there's little opportunity for CEOs to get away with ordering such things and then getting out of punishment.   [ ...reply just to this | comment on the story... | next new ]   61.  Re: Burton Malkiel   by slippytoad       at Mon 1 Jul 7:59am score of 1   in reply to comment 18     I really believe that the only way to get this to stop is to send the heads of both the accounting firm and the corporation as well as all of the parties directly involved to jail In a box? Wouldn't they start to stink? Oh, you mean the "people who are heads of the etcetera etcetera." Sheesh. I get -1 for misunderstanding the context. Woohoo!!!!! FUCK YEAH!   [ ...reply just to this | comment on the story... | next new ]   63.  Re: Burton Malkiel   by emtetede       at Tue 2 Jul 3:14pm score of 1   in reply to comment 40     "The head of the accounting firm may very well just not know what his subordinates are doing for each client; with a large firm, I don't think there's any way he humanly could." As a former auditor, I can tell you that this is a pretty sound statement. Most accounting firms are structure so that the partner is removed from the details. They only review and question what's given to them by the senior manager of an engagement. Their role is purely top-level as far as financials are concerned; they're there to schmooze the clients and sign the audit opinions. Most of work get done at the staff and senior staff level and then its passed on to the managers. At each level they are more removed from the detail. Managers and seniors often run multiple engagements at the same time. They function to review what is given to them by the staff. Audit staff are typically made up of college graduates with no accounting experience (other than what they learned in college). It seems that the general public thinks that an audit opinion provides 100% assurance that the numbers are correct. If you read an audit opinion, you will soon realize that this is completely false. Also, management can easily collude and provide auditors with wrong information; there isn't an auditor procedure that will discover collusion. Mike Doan   [ ...reply just to this | comment on the story... | next new ]

19.  cameras   by miles       at Fri 28 Jun 10:33am score of 1     hey, maybe in our world of ever-decreasing privacy, CEOs and CFOs should be required by shareholders to make the small sacrifice of having their lives monitored and recorded full time. that, and maybe the justice system shouldn't just put execs in jail for fraud, it should put restraining orders in place to prevent them from ever being in charge of anyone else's money, ever again. this is an experiment designed to elicit an emotional response   [ ...reply just to this | comment on the story... | next new ]

20.  Change   by Kilroy77       at Fri 28 Jun 10:34am score of 1     It seems that there is little motivation for some companies CEO's and CFO's to make the right decisions these days. They seem to be fully aware that any penalties associated with their crimes will be minimal at best. A nice cushy federal prison term, all the while they have banks accounts that are gaining interest on moneys that most people will see in a lifetime. When they get out, they get to live their lives without having to contribute one dime to society or have the need to work at all. How many of these scandals is it going to take before we start giving these people incentives not to cheat and steal? Take all the money, houses and cars. Put them in a real prison, with REAL criminals. Have them try to create win-win situations with some of those folks. Prison showers, from my understanding, give a whole new meaning to "thinking outside the box". What's it gonna take. There little or no risk associated with these crimes. Maybe there should be. WHO ATE MY BREAKFAST PANTS?   [ ...reply just to this | comment on the story... | next new ]

41.  Re: Change   by Sigivald       at Fri 28 Jun 3:00pm score of 1   in reply to comment 20     One problem: All that is illegal. You can't (morally; there's some legal precedent from drug-war confiscations, but those are wrong too, in general, to the extent they ignore the qualifications below) confiscate all of someone's property and their estate just because they committed fraud. You might have a case for confiscation if you can show that the items being confiscated are purchased with "dirty money" (or are themselves dirty money, in the case of bank accounts), but not otherwise. Of course, there's no reason you can't confiscate the dirty-money-proceeds and then slap on a perfectly legal judically-approved punitive fine, which would, if upheld through appeal, require him to sell all his stuff to pay it off. But just confiscating everything because They Did Bad Stuff is, well, Un-American. Crime should be punished, and fraud at this level tends not to be, enough to discourage it severely. But the way to do so is not "take all their stuff and send them to maximum security prison". For one thing, MaxSec prison space is needed for Real Dangerous Fuckers, not mere liars and con-artists. Fines and some jailtime should work just fine. Especially if the fines remove any fiscal benefit.   [ ...reply just to this | comment on the story... | next new ]   48.  Re: Change   by PerryStroika       at Fri 28 Jun 4:37pm score of 1   in reply to comment 41     "You might have a case for confiscation if you can show that the items being confiscated are purchased with "dirty money" (or are themselves dirty money, in the case of bank accounts), but not otherwise." YOu can also open them up to civil lawsuits. Court won damages, if they're large enough, would add up to something not unlike "total confiscation" and leave them with nothing. And let's face it. With all the lawyers out and about nowadays, they're all over every chance to sue that you can shake a stick at. As to the issue of maximum security incarceration, one big case of corporate accounting fraud can do an incredible amount of damage, equivalent to the work of many pickpockets, burglars and shop lifters. These people do go to prison, and what I would ask is why the big ones need be treated any differently. Based on the amount of damage done, some substantial minimum sentences are in order. What I do believe, adamantly, is that a person found guilty of this kind of fraud should be barred from ever running a public company again, or of serving in an managerial post in any capacity. No consulting fees. This happens de facto, usually, but sometimes they do, amazingly, make their way back into some kind of position of authority. Mouthpiece   [ ...reply just to this | comment on the story... | next new ]

25.  Xerox must be incredibly stupid or lazy   by GodSpiral       at Fri 28 Jun 11:28am score of 2.5 informative     They need to get a few clues from Global Crossing, because fudging revenue numbers is easily done "legitimately" through subsidiaries. If you have $1M in equipment that you are leasing at $100K per year, sure it sucks to only book $100K/yr in sales, but you don't have to put up with those annoying constraints. You're a corporation, goddam it! Act like you own those bitches. Just create a subsidiary. Invest $1M in it. Have it buy $1M in equipment from you. (You've just spent no cash). And on top of that, just have the subsidiary kick back $100K in dividends or high interest loans each year when it collects lease payments so you get to book extra revenues. So the net effect is instead of just $100K/yr in sales revenue, you get $1M in assets (Subsidiary shares), $1M in sales revenue + the same $100K/yr in investment income (instead of sales) GAAP, baby! All Calculating American Satanists are Evangelical Christians   [ ...reply just to this | comment on the story... | next new ]

27.  Re: Xerox must be incredibly stupid or lazy   by astrogirl       at Fri 28 Jun 11:54am score of 1   in reply to comment 25     Gary Winnick is no fool -- he learned from the best: "Others who benefited were former associates of Mr. Winnick's from his days in the 1980's as a former sales executive at Drexel Burnham Lambert under Michael R. Milken. Jay R. Bloom, Andrew R. Heyer and Dean Kehler, all former Drexel bankers, were instrumental in providing Global Crossing with $35 million in financing before the company went public..." (quote from a NYTimes article permalinked read the entire comment...   [ ...reply just to this | comment on the story... | next new ]   34.  Re: Xerox must be incredibly stupid or lazy   by AshbyMan       at Fri 28 Jun 12:27pm score of 1   in reply to comment 25     I daresay that is the first time in history that "GAAP" has appeared next to "baby!" "Without Music, Life Would Be An Error" Nietzsche   [ ...reply just to this | comment on the story... | next new ]   39.  Re: Xerox must be incredibly stupid or lazy   by projectpaperclip       at Fri 28 Jun 2:46pm score of 1.5 funny   in reply to comment 34     ahhh, but does Baby Gap count? (now smack me for knowing such a thing exists)   [ ...reply just to this | comment on the story... | next new ]

28.  The Depression Part II: America's Last Gasp   by no-thing       at Fri 28 Jun 11:55am score of 0.5 irrelevant     hey, it was a good run, but it's time to close shop. Enron, Anderson, Worldcom, Martha Stewart and now Xerox. this is just the beginning of the 2nd Depression. and it's gonna get a lot worse before it gets better. how ironic that Martha Stewart is going to become the poster-woman for the global economic collapse and sharp decline of the Western Civilization.   [ ...reply just to this | comment on the story... | next new ]

31.  Re: The Depression Part II: America's Last Gasp   by PerryStroika       at Fri 28 Jun 12:01pm score of 1.5 informative   in reply to comment 28     "Enron, Anderson, Worldcom, Martha Stewart and now Xerox." Martha Stewart is small potatoes compared to what these four companies did. Also, let's not forget Lucent, Tyco, Qwest, Cendant, Waste Management, Microstrategy and Sunbeam. Account fraud has been on on the rise for awhile now. Big companies, all of them. Mouthpiece   [ ...reply just to this | comment on the story... | next new ]   42.  Re: The Depression Part II: America's Last Gasp   by Sigivald       at Fri 28 Jun 3:05pm score of 1   in reply to comment 28     Do I sense wishful thinking? A market correction and the exposure of some high-profile fraud don't make for a Great Depression or "Global Economic Collapse". Christ, Xerox is still making a profit, as near as anyone can tell, legitimately. WorldCom, while its stock isn't worth poop anymore, still has zillions of dollars worth of fibre laid, and a huge revenue stream. The economy is basically quite healthy - note that the fraudsters have been caught and their stock is now worth nothing, and they're likely to see jailtime. No depression is in sight. The US and world economies are not skyrocketing, but neither is it plummeting. In fact, at least for the US, it's growing.   [ ...reply just to this | comment on the story... | next new ]   43.  Re: The Depression Part II: America's Last Gasp   by gordon shumway       at Fri 28 Jun 3:26pm score of 1   in reply to comment 42     "Do I sense wishful thinking?" Yeah, these comments reek of it. I think many of the posters' idea of paradise would be a completely government run economy headed by Ralph Nader.   [ ...reply just to this | comment on the story... | next new ]   49.  Re: The Depression Part II: America's Last Gasp   by no-thing       at Fri 28 Jun 4:52pm score of 1   in reply to comment 42     oh, right, of course! i can't wait for the starvation, rioting, looting, martial law, etc. sounds great. i don't know why i ever doubted the whole Republican plan. must be that darn common sense. anyway, enough sarcasm. if the economy is doing so well, than please explain the skyrocketing unemployment rates? granted i am far from an expert in economics, but everyday on the news we hear "the recession is over" and then, in the next breath, "company X is laying off thousands upon thousands of employees". huh? obviously, someone is not telling the truth. the truth is it's bad, really bad, and it's getting worse. what recent events show us (in addition to the the fact that corporate america cannot be trusted) is that the whole privatization thing just doesn't work. certainly it may work in the short term for the billionaires (you know, all 150 of them) while the rest of us, the working people and the poor, suffer, lose our savings, collect unemployment, hopefully someday finding work somewhere. maybe selling apples on streetcorners? vaudeville? i hope that i am wrong, but i really don't think so.   [ ...reply just to this | comment on the story... | next new ]   55.  Re: The Depression Part II: America's Last Gasp   by mischief       at Sat 29 Jun 6:12am score of 1   in reply to comment 49     if the economy is doing so well, than please explain the skyrocketing unemployment rates? For a real scare, look at a typical laid-off worker right now: highly educated, years of experience in a technical field, earned a salary slightly above the annual average. Getting a picture, yet? The loss of productivity occurring now must be staggering, if someone would compute it. Where did these jobs go? Overseas. Where are America's most productive workers now looking for jobs? Overseas. I'll leave it to you to finish this equation. "And then... and then... and then...", and then the man who stuttered died, his last words an echo of his life   [ ...reply just to this | comment on the story... | next new ]   56.  Re: The Depression Part II: America's Last Gasp   by no-thing       at Sat 29 Jun 7:44am score of 1   in reply to comment 55     Where did these jobs go? Overseas. Where are America's most productive workers now looking for jobs? Overseas. yep. that's about the size of it. i'm actually headed to Japan in the November to work as an English teacher. luckily, the fact that i am hard-working and educated still seems to matter in other countires. i don't have to work at Starbucks. i did great in school. graduated in the top 10% of my class. worked my ass off in the job world for nearly ten years. have tons of tech skills and experience. laid off back in late December (merry christmas suckers!). still jobless. although i have tons of experience, great contacts, great references, etc. i absolutely cannot find a job in the US. it is impossible. this is just the way it is. this country is finished. it seems the Republican plan -- to turn the United States into a 3rd World-like military dictatorship -- is working out just fine.   [ ...reply just to this | comment on the story... | next new ]   59.  Re: The Depression Part II: America's Last Gasp   by peteb       at Sun 30 Jun 7:37pm score of 1   in reply to comment 55     You hit it right on the head. Me, I'm moving to New Zealand or Germany as soon as I get my degrees. One future migrant tech-worker, coming right up. However(33), consider(27) the public(21) problem(19) of money(18) and the world(29) first(18) instead(19) of school(22).   [ ...reply just to this | comment on the story... | next new ]

36.  Ironically   by Standeck       at Fri 28 Jun 1:46pm score of 1.5 astute     The restatement of revenues involves certain bundled equipment/supplies/service contracts that were spread over multiple years. Restating those revenues is going to move the recognition of those monies into later years, thus making current results look even better! The part of accounting that everyone agrees on is a small portion of the total; you could call it the book-keeping part. When you get into when to recognize revenues from multi-year leases it becomes a little more subjective. The media is just whipping itself into a frenzy to sell papers/capture ratings. Since when did accounting get sexy? Just Xerox' luck to be filing their 10K the same week as WCOM went TU.   [ ...reply just to this | comment on the story... | next new ]

54.  Re: Ironically   by Richard Banks       at Sat 29 Jun 6:00am score of 1   in reply to comment 36     A two billion dollar "restatement" by a struggling company is newsworthy. I haven't found the Xerox story to have been told in a "frenzied" manner at all. You make a good point about the proper accounting of revenues spread over multiple years. I'm sure there are a number of accepted methods of accounting for this. The problem arises when companies account "aggressively" for these projected earnings. Invariably, this means optimistically. And, like you say, the line between optimism and fraud becomes subjective. But it is so well-known that companies will tend toward self-serving optimism, that shareholders (and regulations) demand independent verification of results. And it is this verification that is, rightfully, suspect. Even in cases where companies may only be unlucky enough to file during the current firestorm. "I'm Against This War. But I'm not with These Other People."   [ ...reply just to this | comment on the story... | next new ]

46.  Are we trying to get the full alphabet?   by doomjesse       at Fri 28 Jun 4:09pm score of 2 witty     Adelphia Enron Tyco Worldcom and now Xerox and only 21 letters to go.   [ ...reply just to this | comment on the story... | next new ]

62.  [G]lobal Crossings   by LostBoyJim       at Tue 2 Jul 9:10am score of 1   in reply to comment 46     20.   [ ...reply just to this | comment on the story... | next new ]   64.  Re: [G]lobal Crossings   by doomjesse       at Tue 2 Jul 6:55pm score of 1   in reply to comment 62     Damn missed one. Thanks for the correction. Any bets on the next to fall?   [ ...reply just to this | comment on the story... | next new ]   65.  [M]erk and [H]alberton   by LostBoyJim       at Wed 10 Jul 10:39am score of 1   in reply to comment 46     with [G]lobal Crossings [H]alberton down to 18. jim   [ ...reply just to this | comment on the story... | next new ]

47.  Accounting fraud made concrete   by call -151       at Fri 28 Jun 4:22pm score of 2 informative     Paul Krugman has a very well done op-ed piece in todays New York Times, translating many of the recent accounting scandals (Enron, WorldCom, Adelphia, Dynergy- no Xerox yet...) into the finances of running an ice cream stand. It's hilarious and insightful- scary how simple the WorldCom one is in relation to the others...   [ ...reply just to this | comment on the story... | next new ]