NEW YORK _ More and more these days, the once-anonymous
accountant is becoming uncomfortably visible as the quiet
profession comes under widening attack for allegedly slipshod
scrutiny of the nation's bookkeeping.
Blue-chip accounting firms are under fire for missing cooked
books by insurance companies, banks, real estate firms and
Take the Big Six firm of Arthur Andersen Co., for example.
It was blasted recently by a Senate subcommittee for not
uncovering deep-seated financial problems at Empire Blue Cross
Blue Shield, the nation's largest nonprofit health insurer.
And there are plenty of problems dogging other Big Six firms _
which besides Andersen include Coopers Lybrand, Deloitte
Touche, Ernst Young, KPMG Peat Marwick and Price Waterhouse.
In the last few years, the firms have been targeted in a raft
of lawsuits alleging that accountants missed fraudulent
bookkeeping at publicly held companies that failed _ and left
investors holding the bag.
Analysts such as Howard M. Schilit, author of "Financial
Shenanigans: How to Detect Accounting Gimmicks and Fraud in
Financial Statements," say the industry needs to clean up its
"There's a liability crisis," he said. "The auditors have to
do a better job at detecting financial scams, pure and simple."
The Big Six firms, which audit nine out of every 10 publicly
traded U.S. companies, are facing $30 billion in claims from
pending lawsuits _ a dramatic jump from just a decade ago.
Critics, arguing that the industry hasn't kept pace with the
complexity of today's financial, say accountants have mostly
themselves to blame. The firms, however, blame lawyers they say
pursue frivolous lawsuits to force settlements with "deep-pocket"
No matter who's to blame, most see the lawsuits as major
trouble for an important U.S. industry with $30.8 billion in
business worldwide and 102,442 workers in America alone.
"If one of the major lawsuits is successful, I predict a Big
Six firm will fail," said James C. Emerson, editor of Emerson's
Professional Services Review, which rates accounting firms.
Here's a rundown of recent woes afflicting the industry:
In June, the U.S. Senate Permanent Subcommittee on Investigations
blasted Arthur Andersen's $1.9 million, taxpayer-funded report on
Empire Blue Cross, which generally endorsed the insurer's
accounting. But the Senate panel called the report "fatally
flawed" and lacking in "independence."
The lawmakers concluded that Andersen displayed an "absence of
professional skepticism" and "an undue reliance upon (Empire's)
representations." Responding to the criticism, Andersen officials
have stated that their job was to analyze managerial _ not
financial _ problems. …