overview

past booms

Australia

snapshot

dotcoms

telcos

peaks

actors

media

fiction

accounting

landmarks

related
Guides:

Economy

Governance

Networks

eCapital




related
Notes:

Analysts

     Accounting

This page considers financial reporting, auditing, expectations and responsibilities.

It covers -

• introduction
• impacts

Particular actors are discussed in more detail in the Information Economy guide on this site.

     introduction

We suggested earlier in this profile that blame must be shared with private sector financial service providers, in particular global groups such as as Arthur Andersen that had expanded from audit activity to embrace management consulting and even legal advice.

Critics have noted the 'expectations gap', rediscovered every decade. Investors appear to believe the accountants are supposed to stop fraud. Accountants refuse to accept that responsibility, arguing that their task is not to suspect that management is lying but simply to make sure that the data — whose accuracy is the responsibility of boards and managers responsibility — is presented in a manner consistent with accounting convention.

In the US the 'big five' - PricewaterhouseCoopers (US$2.2 billion turnover in 2000), KMPG (US$1.3bn), Deloitte Touche Tohmatsu (US$1.2bn), Ernst&Young (US$1bn) and Arthur Andersen (US$0.9bn) - were belatedly found wanting by the SEC and other agencies. As noted on the preceding page, Andersen appears to have made more money from providing management advice to Enron than underpinning corporate compliance through rigorous independent audit services.

Insights are provided by Inside Arthur Andersen: Shifting Values, Unexpected Consequences (New York: Prentice Hall 2003) by Susan Squires, Cynthia Smith, William Yeack & Lorna McDougall, Paul Barry's Rich Kids (Sydney: Bantam 2002), Maggie Mahar's Bull! A History of the Boom, 1982-1999 (New York: HarperBusiness 2004) and Jean Gadrey's New Economy, New Myth (London: Routledge 2003).

In retrospect agencies such as Australia's ASIC took too positive a view of those they supposed to regulate. In some cases, such as insurance sector regulation by the Australian Prudential Regulation Authority (APRA) the lack of will appears to have been compounded by lack of expertise and resources, resulting in the HIH, OneTel, Froggy.com and Enron debacles.

    next page  (landmarks)