Infectious Greed: Restoring Confidence in Americas Companies - page 41


  1. James Bandler and Mark Maremont, "Seeing Red: How Ex-Accountant Added Up to Trouble for Humbled Xerox," Wall Street Journal , June 28, 2001, p. A1.

  1. Civil Action No. 02-272789, SEC vs. Xerox Corporation , Southern District of New York, United States District Court, April 11, 2002.

  1. Andrew Countryman, "Focus of Xerox Probe Shifts to Stock Sales," Chicago Tribune , July 2, 2002, p. 1.

  1. David Leonhardt, "Tell the Good News: Then Cash In," New York Times , April 7, 2002, p. C1; Carol Emert, "Ellison Cashes In Stocks for $895 Million," San Francisco Chronicle , February 14, 2002, p. C1.

  1. David Leonhardt, "Oracle Says Earnings Won't Meet Forecasts," New York Times , March 2, 2002, p. C5.

  1. Jennifer Carpenter and Barbara Remmers, "Executive Stock Option Exercises and Inside Information," Journal of Business 74, no. 4 (2001): 513 “534.

  1. Ransdell Pierson, "Bristol-Myers Under SEC Probe for Sales," Reuters Business Report , July 11, 2002, 6:04 p.m. EST.

  1. "Bristol Has New Chairman," New York Times , September 14, 2001, p. C2.

  1. Mike Allen and George Lardner, Jr., "Harken Papers Offer Details on Bush Knowledge; Motive for Stock Sale in '90 Remains Unclear," Washington Post , July 14, 2002, p. A1.

  1. Mike Allen, "Bush Uncooperative at First in '90 Probe, SEC Memo Suggests," Washington Post , July 12, 2002, p. A7.

  1. Ibid.

  1. Tom Hamburger and Jerry Markon, "Martha Stewart Faces New Suit Alleging She Sold Before News," Wall Street Journal , August 22, 2002, p. A6.

  1. Bruce Meyerson, "Ebbers' Woes Mounted with WorldCom," Associated Press , July 26, 2002, 2:24 p.m. EST.

  1. John Byrne, "No Excuses for Enron's Board," BusinessWeek , July 29, 2002, pp. 50 “51.

  1. Devlin Barrett, "3 Former Adelphia Execs Arrested," Associated Press , July 24, 2002, 11:08 a.m. EST.

  1. Jerry Markon and Robert Frank, "Five Adelphia Officials Arrested on Fraud Charges," Wall Street Journal , July 25, 2002, p. A3.

  1. Sallie Hofmeister, "Low View of Adelphia's High Life," Los Angeles Times , July 26, 2002, p. A1.

  1. Kathryn Kranhald and Alexei Barrionuevo, "Enron's Fastow Took Kopper Under His Wing," Wall Street Journal , August 23, 2002, p. C1.

  1. Mark Maremont and Laurie Cohen, "How Tyco's CEO Enriched Himself," Wall Street Journal , August 7, 2002, p. A1.

  1. Jeanne King and Tim McLaughlin, "3 Former Tyco Execs Charged with Fraud," Reuters Business Report, September 12, 2002, 2:10 p.m. EST.

  1. "NYSE: Bogus Flights for Ex-Lehman Manager," Reuters Business Report, August 28, 2002, 3:48 p.m. EST.

Part 2: The Failure of Monitoring Systems

Chapter  5.   Accountants and Auditors

Chapter  6.   The Board of Directors

Chapter  7.   Investment Banks

Chapter  8.   Analysts

Chapter  9.   More Failed Monitors: Credit Rating Agencies and Lawyers

Chapter 5. Accountants and Auditors

Accountants and auditors are an important part of the monitoring system. We rely on them to provide us with an accurate picture of a firm's business activities. However, to be effective monitors , they have to be credible. Unfortunately, public opinion of the accounting profession is at an all-time low. It's no wonder that Arthur Andersen's shredding important Enron documents was front-page news. Its eventual conviction on obstructing justice charges brings the "Big 5" accounting firms down to only four. Since then, news of one accounting scandal after another has dominated the media.

In response, the government has proposed many solutions for bringing ethics to the profession and trust back to investors. The proposals are full of new laws and regulating authorities. In looking at these possible solutions (which we do in Chapter 12), we find that they seem to be targeted at specific, perceived problems in the industry or at individual accountants. However, we feel that the accounting profession is a system of interlinked monitors, advisors, and evaluators . Designing solutions to fix any problems in the industry can only be effectively accomplished through the full understanding of this system.