Half Measures

IN THE three years since accounting shenanigans at Enron first came to light, followed quickly by accounting seams at WorldCom, Parmalat and others, the auditing profession has been trying to sort itself out and steer clear of trouble.

But accounting scandals continue to surface - most recently at America's giant mortgage company. More trouble may be brewing: in die newest twist in America's unfolding insurance-company scandal, regulators have recently launched investigations into companies' use of certain insurance products to "manage" earnings.

Should they unearth dodgy doings, the auditors who signed off on company accounts could find themselves in hot water. Indeed, Deloitte & Touche, the world's biggest audit firm, faces a lawsuit of up to $2 billion for its audit of Fortress Re, a re­insurance firm that allegedly used certain insurance products to inflate profits.

The continued inability of auditors to thwart accounting trickery means that, even after the flood of reforms put in place after Enron's collapse, the industry remains a problem. The concentration of the industry into the "Big Four" accountancy firms that now audit the lion's share of the world's large, public firms heightens these concerns.

Given the implosion of Arthur Andersen, Enron's auditor and once the fifth-biggest accountancy firm in the world, after a criminal indictment for obstruction of justice, there is a real question about how aggressively regulators can now pursue the surviving four big auditing firms for any future misconduct.

The Economist

Exercise 6. Translate the text orally.

Bad for cfOs, Good for Investors

It has been a tough year for Perot Systems Corp. In April, die Piano (Tex.) tech-services company said it was taking a $29 million charge and lowering its earnings targets. The reason: The Financial Accounting Standards Board had a new rule in the works that would rein in a common corporate practice of booking expected revenue from some long-term contracts years before the bill has been sent.

Three months later, the company's auditors, PriceWaterhouseCoopers, got a look at the rule’s final wording, and it was bad news. They told Perot to restate its results for the first and second quarters and to take another charge, this one for $14 million. The timing — right after the company's second-quarter earnings presentation — was terrible. After that, its shares went nowhere before finally picking up this month. For Chief Financial Officer Russell Freeman, the rule change has been a "tremendous headache."

"Healthy change" in fact, in industries ranging from media to telecom, CFOs are reaching for the aspirin. The rule will make earnings and share prices more volatile for businesses that depend on contracts with more than one type of revenue — such as the one-time payments that Perot collects when it finishes building a corporate computer system and the continuing fees it gets for running it. In these cases, companies can no longer book revenues long before they arrive in order to offset high up-front costs of fulfilling a contract, such as hiring workers or getting equipment and supplies.

Business Week

Exercise 7. Suggest the Russian for the following.