What would Enron have saved and why

economy : Enron and the auditors

Paradoxically, investor confidence in the American economy may be restored more quickly and thoroughly after the Enron scandal if Enron's accountant Arthur Andersen survives. That would mean that Paul Volcker has prevailed with his plans to reform the auditing industry.

When Andersen agreed to a review by the former Federal Reserve Chairman to save his reputation, the company probably thought it was just buying a bonnet ornament. Now she knows she's got a four-wheel drive pickup truck, and she has the tire tracks on her back to prove it. Volcker's commission recently published its drastic recommendations.

The Commission is determined to restore shareholder confidence in Andersen and in balance sheets and audits. Your main concern is that Andersen separates the lucrative advice from the more prosaic examination. Eliminating this conflict of interest is certainly not the solution to all evils: it will not turn water into wine, and Andrew Fastow will not turn into Francis of Assisi.

It would be better to abolish the state review. Let the managing directors take responsibility for their results. But apparently that's not going to happen. And as long as the audit exists, shareholders should be able to trust that the auditor's signature is worth something. Since the auditors have also started offering advice, this trust has waned anyway. When a company like Enron is wrong with the numbers, the fear of losing consulting fees can overcome auditing concerns.

The Wall Street Journal has always welcomed the steadily growing number of shareholders in the US and kept a hopeful eye on Europe's own, still young, equity culture. But mass capitalism cannot be sold on either side of the Atlantic if the masses do not believe capitalist numbers. The Volcker pickup seems to be going to be tough, but there is no better alternative.

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