Stage set for review
Published:Friday | April 9, 2010 | 12:00 AM
Wilberne Persaud, in his column of April 1, after outlining the sequence of actions in what appears to be accounting window dressing by Lehman Brothers, posed the question as to what will be the response of the regulatory authorities in the United States.
I think it is important for your readers and Mr Persaud to be aware of the actions that have recently been taken.
In March, the Division of Corporate Finance of the United States (US) Securities Exchange Commission (SEC) sent a letter to the chief financial officers of the major public financial companies asking them to detail - among other related things - their accounting for repurchase and securities lending agreements at the end of each balance sheet quarter for the last three years and the underlying business reasons that led to these accounting entries.
A sample letter sent out is listed on the SEC's website, and it shows that the stage is being set for a comprehensive review.
I am sure Mr Persaud will be happy to know that members of the US analyst and accounting community have always taken the issue of accounting shenanigans very seriously.
Indeed, several aspects of the exam syllabus detail how to uncover accounting schemes that attempt distort the financial picture of an entity and the warning signs to be on the lookout for.
Indeed, there is a good record of documenting these troubles and taking corrective actions, a move of which would reassure Adam Smith in the faith of the system.
Analysts frequently internally adjust public financial reports to suit their forecasting models and aid better cross-industry company analysis.
I would encourage Mr Persaud to determine how the analyst community interpreted the Repo 105 debacle of Lehman Brothers and to continue bringing issues such as these to the fore.
Duane Barrett, CPA, MSc