ACCOUNTING IRREGULARITIES: THE PERIL, DISCOVERY, AND CURE

Over 500 professionals--CPAs, corporate executives, attorneys, and regulators--attended a conference on accounting irregularities sponsored by Willkie Farr & Gallagher, American International Group, Inc., and the Financial Executives Institute. SEC Chair Arthur Levitt opened the meeting, and former New York State governor Mario M. Cuomo closed it with a luncheon address. In between, lawyers, accountants, and an SEC enforcement staffer went through the phases of a typical financial statement fraud scenario.

Levitt spoke of the need for companies to take a long-term attitude toward financial reporting, one based upon transparency and trust. He reiterated his concerns about companies buckling to market expectations that lead to an erosion in the quality of financial reporting. Levitt's thinking is that the SEC cannot fight the battle alone. The pattern of gimmickry and gamesmanship must be broken. If investors lose faith in the system, uncertainty and instability will be the result--and the markets will suffer.

Host Michael R. Young, a Willkie Farr partner, set the stage for a walk-through of an assumed case of financial statement fraud, an investigation by a special committee, and a restoration of credibility. In many ways, the conference was a showcase for the talent and skills of Willkie Farr partners in assisting with the very painful and obviously costly process of trying to bring a corporate entity back into the trust and confidence of the securities markets--that is, if it is even salvable. *

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