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News and Press Releases |
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HEADLINE:
Accounting Costs Rising As Wary Companies Play It Safe
By: Greg Farrell (contributing Theresa Howard)
USAToday.com. July 31, 2003
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EXCERPT: Those who doubt that the Sarbanes-Oxley Act, signed into law one year ago, has changed anything need to look no further than Freddie Mac. Last week, a board-ordered investigative report determined that top executives at the mortgage finance company managed earnings, but did not inflate them. In June, Freddie Mac's board of directors forced out the CEO, president and chief financial officer after the president, David Glenn, acknowledged he had altered some of his personal work notes that were crucial to the investigation. The swift and massive response to something that used to be considered a misdemeanor shows how seriously companies are taking the Sarbanes-Oxley reforms. "When you look at the speed with which Freddie Mac unloaded its CEO, they're dealing with this like it's another Enron," says securities lawyer David Gourevitch. "On a financial fraud scale, that's the lowest. But boards and management are enormously more sensitive to dealing with these problems quickly and completely." The long-term benefits of the Sarbanes-Oxley Act are still a question mark. Its centerpiece, the Public Company Accounting Oversight Board, is still a work in progress. Other provisions, designed to enhance the credibility of earnings, have yet to be put to the test. But one thing is clear: The threat of new criminal penalties is making top executives play it safe. "There is a great deal less tiptoeing up to the line," says Gourevitch, a former Securities and Exchange Commission lawyer.
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