Although the US giant Enron has nothing in common with Greece’s ETBA Finance, they share one thing. In both cases, auditing failed to shed light on the companies’ finances and uncover what was happening. Even though Greece is a small country compared to the USA, this case of fraud demonstrates the need to take urgent steps to ensure that auditors do their job correctly. Setting strict auditing regulations and increasing the number of independent directors on companies’ boards should be among the measures which are considered necessary to enhance the transparency of corporate financial statements and restore public confidence in the stock market. On Friday, January 25, the Greek Finance Ministry said in a statement that there were «strong indications of the existence of a corruption ring» in ETBA Bank’s subsidiary, ETBA Finance. Soon afterward, it became known that deposits from ETBA Finance destined for an EFG Eurobank Ergasias account had been redirected to a personal brokerage account and a fake receipt issued by somebody else pretending to be an EFG Eurobank Ergasias representative. ETBA Bank said last Monday that it expected losses related to the fraud in its subsidiary to be close to 30 million euros and the amount would be subtracted from the 510 million euros Piraeus Bank had agreed to pay to buy a majority stake in ETBA Bank. Could this fraud have been avoided or noticed earlier? The answer is clearly yes, had the person who audited ETBA Finance done his job correctly or had internal control methods in the firm worked as they should. However, neither did. The fraud was noticed when a new auditor took over the job a few months ago. However sad this story may be, it provides the proper authorities with an opportunity to introduce some overdue changes to ensure that similar activity does not take place in other companies in the future. What has to be done? First, corporate board directors have to become more vigilant and more critical of management at any level. The best way to achieve this, is to have a large number of independent directors sitting on the board who would be subject to strict rules with regard to compensation of any kind. Having these directors may not save a company from fraud, but it reduces the likelihood that it will occur. Second, the entire auditing system has to be reformed. To this extent, an independent panel must be established which would be given the power to set strict auditing standards, investigate all cases and even discipline auditors exhibiting inappropriate conduct. To ensure its independence, the panel should be given access to permanent financing which may take the form of a small user fee paid by all companies, especially those listed on the Athens bourse. Third, the Greek government has to follow the example of the US government and impose limits on the consulting work that accounting firms may do for any public sector entity they audit. In other words, they should not be allowed to provide consulting services if compensation for consulting is significant. The same restrictions should apply to accounting firms which audit private companies doing business with the public sector. Of course, there may be some problems in Greece because public sector entities will have to be clearly defined and criteria will have to be set for identifying the private companies that do business with them. Moreover, although the so-called Big Five accounting firms have legally separated their auditing from their consulting businesses, it is no a secret that some kind of cooperation continues. It is in the best interest of the government, the listed companies, the Athens bourse, Greek society and even the accounting firms themselves that auditing companies avoid conflicts of interest and become more independent to preserve the integrity of financial reports. The ETBA Finance case should become the catalyst for reforming the country’s auditing system. Spain’s reaction to the decline in tourist arrivals could hardly be more different than Greece’s. While the latest data showed a 30-percent drop in bookings for Spain – against tourist arrivals of close to 50 million in 2001 – Spanish hoteliers are not concerned as they believe the situation will improve in the coming months. Their only problem seems to the hike in the costs of a package tour to the Balearic Islands due to the recent imposition of an environmental surcharge. The Spaniards have at the same time developed strong defense mechanisms against unfavorable developments such as terrorist attacks, a jump in the crime rate and other negative factors which could affect their image abroad. Greece, however, has not done anything which could counter negative foreign press reports.