Hollywood, Calif. (Aug. 12, 2002) -- Major changes in financial accounting rules are needed to restore public confidence in the capital markets, Enron whistleblower Sherron Watkins told a group of Certified Fraud Examiners here.
"The financial accounting rules have become too rule-based and not principle-based," Watkins said during a luncheon address, where she spoke candidly about the events at Enron. "Companies feel like they are justified in reporting results by finding a set of accounting rules they think applies to their business and applying those rules even if there's no resemblance to the financial condition of the company or the operations of the company. The idea that a set of financial statements is supposed to fairly represent the condition of the company appears to have gone out the window."
"I'm afraid that the financial accounting system in this country has morphed into something like the tax code. It's pretty much everyone's God-given American right to take the tax code and interpret it as liberally as you can to minimize your taxes," she added. "The problem I see is that even though there are problems in the executive suite at Enron, we also had massive failures by the watchdog groups that are in business to protect investors."
Watkins, who is looking for another job while still working at Enron on some bankruptcy projects, joked, "The problem is that being a well-known whistleblower can hinder your job prospects."
She said the accounting reform bill signed into law last month "goes a very long way to restore the teeth needed to curb unfettered corporate greed. It's important that the goals of this bill are embraced by today's business leaders. We all must work to restore confidence in the marketplace."
"I don’t think monetary fines or prohibition from serving in a CEO capacity will prevent the abuses we've seen at Enron and others," she added. "This proposal to have CEOs certify their financial statements…will work but only if it means jail time for offenders. If the new bill is applied as promised, I think CEOs will almost immediately march down to their accounting departments and say 'I don’t want to be anywhere near the line of inappropriate accounting. If we're near it pull way back.'"
-- Melissa Klein
