The American Spectator

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Answer Central

3.21.02 @ 12:01AM

(Page 2 of 3)

GO FIGURE
Re: Michael Craig's Free Arthur Andersen:
If Mr. Craig has time, could he please help me out with these two concepts? (Thanks)

(1) Won't this be a prime opportunity for one of the other smaller accounting firms to pick up the slack and move into the "Big 5"? It with Arthur Andersen's demise, new firms will be popping up with all the extra employees let loose.

(2) Isn't the system correcting itself already? Companies are being penalized on the stock market for questionable finances, therefore they are beginning to open up their books. Andersen is being driven out of the market for its "questionable" business practices. Capitalism at work -- quickly, I might add.
-- E. Cameron

Michael Craig replies:
E. Cameron raises some good points.

First, it would seem to be a good time for someone new to take a run at the Big Four/Five but it's not going to happen. The gap between those firms and everybody else is huge and getting bigger. Those five firms audit 99% of the Fortune 500's financial statements and that has meant not only big profits but access to the even more-profitable consulting business. An anecdotal example: Andersen's consulting arm had long feuded with the accounting side of the business. It split, went public, and is now Accenture. Like a hydra, Andersen grew a new consulting business to replace it. How can someone on the outside compete with that? Likewise, as Andersen crumbles and its partners bolt, the remaining four behemoths will be in the best position to receive them and their book of business.

Second, the market offers mechanisms for correcting itself, but only over the very long haul. Andersen is falling apart, but other than this indictment for destroying evidence, it didn't really do worse than Ernst & Young did with Cendant's predecessor CUC International or Lincoln Savings & Loan. PriceWaterhouse Coopers is weathering its association with Lucent and Tyco. Peat Marwick will gain from Andersen's departure, but it messed up its audits of MicroStrategy and watched Conseco fall apart. Deloitte & Touche audited the books of Dollar General, which apparently had a mini-Enron of off-balance sheet risks.

More important, for the long-run health of the market, we need to get investor confidence back sooner rather than later. If we had no regulation of securities markets at all, like before the 1934 Act, investors would shun the public markets. Corporations, on their own, would eventually get the message and open up their books more, because they would need to do that to attract money. That could take a long time. Because we already have a system where investors trust the public markets, but are merely questioning whether that trust has been misplaced, a few well-placed rules to assure investors that the game isn't rigged can help the good times roll once again.

Personally, I advocate giving investors more bang for the bucks their corporations pay auditors. Instead of that form letter auditors provide, let's make them earn their money by providing a detailed narrative on the corporation's accounting policies, pointing out risks and weaknesses. I'd even consider tossing in immunity from lawsuit if they sufficiently warn of a risk that later comes to pass and wipes out investors.

ANOTHER CHICAGO CAMPAIGN TO WATCH
Re: The Prowler's Luis, Luis and The Daily Grind's Not Ready for Primary Time:
It will be interesting to see how well Corinne Wood performs in the Republican gubernatorial primary. Her media blitz in recent weeks focused primarily on her being the only pro-choice Republican. I even received mail from Planned Parenthood in support of her. Unless Illinois Republicans are more liberal than anyone suspects, Corrine will be conceding before the opening credits of NYPD Blues.
-- Paul Wayne Smith

Editor's note: Wood came in third in the March 19 primary, with 27 percent of the vote.

BOOK HEAVEN
Re: Jeremy Lott's Amazon Warriors:
Jeremy Lott nailed it with this one! As a bibliophile and chronic reader, as well as a scholar, I would be bereft without Amazon.com! They not only make sure my book "fixes" arrive in a timely fashion, but I, too, would be completely LOST without their online "browsing" features. Moreover, I have bought not only books, but books from AmazonUK, computer software, a DVD player, a vacuum cleaner and cookware from Amazon as well! To be fair, I tried to use Barnes and Noble online and they were HOPELESS.

In addition, over the last few years, I have watched almost all of the local, cozy mom and pop bookstores disappear, only to be replaced with huge B&N anchor stores. I like Amazon so much, I bought some of their stock after the 9/11 attacks to help Wall Street recover; I'm delighted to say that I recently sold my shares for double what I paid for them! I want to meet Jeff Bezos and shake his hand! Whereas Steve Case is another story. Thanks for stating something that needed to be said about two domestic dotcom titans like Amazon.com and AOL/Time/Warner.
-- Jennie Taliaferro
Dallas, TX

JESUIT FALLOUT
Most readers of George Neumayr's article "Jesuits Implode" probably don't realize the extent of the intellectual and moral chaos in Catholic education that can result from the disintegration of the Jesuit order.

Quite simply, the Jesuits are the dominant force in Catholic higher education. No one else is even close.

Most non-Catholics get their impressions of which Catholic colleges and universities are the most important from reading the sports pages or from seeing which schools are playing on television. Let's make a list of most of the Catholic schools which have won NCAA basketball championships. Holy Cross, San Francisco, Loyola of Chicago, Marquette, Georgetown -- all Jesuit.

Letter to the Editor

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