Comrade:

The notion is that a corporation is incorporated
thru the offices of the secretaries of state wihin the
states of the United States.  The organizers of such
an organization are authorized thru the Securities
and Exchange Commission to sell stocks (common and
preferred) to potential investors.  The Board of
Directors are entrusted in maintaining their fiduciary responsibilities in the maximization of
shareholder values.  The directors, who in actuality are self-employed individuals, further delegate management responsibilities to management.

Unfortunately for investors of some major corporations, both upper management and the Board of Directors have co-mingled their personal financial interests with the objectives of making corporations profitable.  Profitability, unfortunately for Enron and Tyco were overvalued at the expense of investors.  The ethical pronouncements for Authur Andersen in its audit engagement of Enron revealed that, it (Andersen)had direct financial interests in Enron.  This behavior by the auditing giant made it liable to shareholders because they may have  depended on the audit reports.  Andersen failed in its capacity as a continuing auditor in carrying out its obligation with professional scepticism.

Mr. Lay, the former Chief Executive Officer failed in
his fiduciary responsibility in protecting both the stockholders and his employees.  In a conference
meeting after being told by an officer that some accounting irregularities may have occurred at Enron, Mr. Lay assured his employees that the financial propects of the energy giant were supreme.  In his dubious act, Mr. Lay sold thousands of stocks at a market rate of $90 a share.

Stock brokers and those involved in security transactions believe that if a CEO sells his stocks,
the probability is that the company may be facing uncertainty and the possibility of a going-concern
issue.  This theory came to light before the close of
the year when Enron announced its financial difficulties.

The questions that I am asking are: Did Enron cooked its books to increase profits?  Were sales overvalued? Were expenses undervalued? Were research and development costs amortized?

If the answers to these questions are in the affirmative, then Enron has a serious violation with
the Securities and Exchange Commission and the American Institute of Certified Public Accountants.
My prediction is that there will numerous class-action suits against Enron and Aurthur Andersen.

While I believe in capitalism, I am worried that corporate growth in search of capital financing is at its worst scale.  The Securities and Exchange Commission, thru the efforts of Congress should tighten rules of conduct and also strict accounting
reporting.  The American Institute of Certified Public Accountant should not have sole responsibility in promulgating accounting standards.

This affirms my belief that Corporate greed is a going issue.  The shareholders should be protected.  The integrity of an audit engagement should be carried with professional scepticism.  An audit firm should not do both an audit engagement and consulting services, whether through compilation or review.  I am concerned with this because in a compilation, an auditor does not have to be independent.

I hope the AICPA can promulgate that quarterly financial reports be audited due to the nature that
corpoations readjust prior quarterly reports in current quarters.  Why should potential investors rely
only on annual reports?  There may be some major developments that may have taken place after the audit
report.  Reports that are material and have direct financial interest on a company are not reported in their entirety in quarterly reports.  I believe that
in order to bring investor confidence, strict accounting standards should be established.

Another troubling issue is the treshold of materiality.  While the financial statements are the responsibility of management, an independent auditor measures materiality independently.  Some will say that the aggregate is minimized because management does not measure materiality level.  Well, does an auditor contract with an appraiser for an asset that he or she is unfamiliar with?  Why then should materiality level be measured only by the auditor?  I think the AICPA should evaluate materiality threshold independently.

The free flow of derivative theory is another issue that should be dealt with.  This risky venture is bad accounting because derivative terminology is vague.

Naphiyo,

Comrade ML Jassey-Conteh
Greensboro, NC/Kombo East Constituency
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