OPINION

Accounting scandal

Another major US corporation, telecom giant WorldCom, is collapsing after being allegedly involved in an unprecedented accounting scandal – one of the biggest in American history. Over the last five quarters, company officials had misstated accounting figures to the amount of $3.8 billion, deceiving shareholders, investors, and state officials. It should be noted that until last month, the company’s books were kept by Arthur Andersen auditors, the firm which concealed the fraud in the US energy giant Enron Corp. A product of the new economy bubble, WorldCom saw its shares trading at about 26 cents on the dollar from $62 in June 1999, while its stock market value plunged to $1 billion from $115.3 billion two years ago. In an attempt to stay afloat, WorldCom announced plans to cut 17,000 jobs. Moreover, former Chief Executive Bernie Ebbers, who resigned in April, owes the company more than $366 million in personal loans. The US Securities and Exchange Commission (SEC) made reference to «accounting improprieties of an unprecedented magnitude.» The new disclosures, which occurred a few months after the Enron scandal, have raised suspicions of a broader problem which surpasses US boundaries. The panicked reaction to the disclosure by Europe’s key markets was not a coincidence. European firms have often employed similar accounting tricks. It is no coincidence that only 500 of the approximately 7,000 companies listed on European stock markets are in line with international accounting standards, forcing the EU to introduce strict measures for their implementation as of 2005. The phenomenon is much more acute in Greece as cooking the books is a very widespread practice. Greece’s national accounting system has not been adapted to firms’ contemporary needs and is lacking in a global outlook. Nor are there any reliable monitoring bodies. Even companies that are listed on the Athens Stock Exchange misstate their accounting figures, still emerging virtually unscathed. Therefore, businesses tend to ignore the lengthy comments made by auditors over their balance sheets – often serious enough to call for state intervention. If this situation continues unchecked, it will continue to undermine the credibility of companies and of the stock market, and could even jeopardize Greece’s national economy.