GUEST OPINION: Impact of Enron

By Brian Gordon, Special to the Business Press

May 07, 2002 - As the proceedings and investigation of the Enron and Arthur Andersen LLP debacle continue, the impacts on businesses and accountants is yet to be determined.

However, two things are certain about this issue.

The financial results that companies report will be under more scrutiny by stakeholders, which include financial institutions, stockholders, owners, potential investors, potential lenders and the Securities and Exchange Commission (SEC), if a publicly held enterprise

Accountants (individuals) and accounting firms will also be held under a microscope with regard to certifying statements and the range of services provided.

With the recent reviews and investigations by the SEC on potentially aggressive accounting positions taken by public companies, such as Xerox and others, companies are expected to take more conservative accounting positions on future transactions.

However, despite this going-forward approach of conservatism, public companies that have taken aggressive positions in the past will still be subject to scrutiny and review by the SEC and other stakeholders.

In addition to the impacts on company reports of operating results and earning releases in the media, a watchful eye continues on the independent public accountants reviewing those results.

In recent months, both the regulatory bodies and the public at large have looked at the companies audited by Andersen closely for potential improprieties. Not only has Andersen obviously been impacted, but also other Big 5 firms, as well as smaller local CPA firms, have been probed and questioned about practices and procedures.

The Enron/Andersen debacle will likely cause a revamping of the role of accounting and audit firms. It is expected that the AICPA (American Institute of Certified Public Accountants), the governing body of CPA practices, and the SEC will likely restrict the functions a CPA can perform for his/her clients.

Specifically, new regulations may limit the ability for CPA's to provide certain consulting services (outside of audit-specific services) to their clients.

While these changes have already caused CPA firms to think cautiously about services they provide to their clients, they may also have other impacts.

It is likely that changes in the rules and regulations governing CPAs may result in overall higher professional service fees for companies that now must re-train another accounting and audit firm on their business practices and procedures, as well as, require CPA firms to pursue alternate revenue-generating opportunities to maintain their existing infrastructure and employment base.

Brian Gordon is a partner at the Las Vegas-based financial advisory services firm, Gordon & Aguero, Business Consultants and CPAs.

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