More accounting shocks may be on the way

Since WorldCom Inc.'s revelation last week of the largest accounting deception in corporate history, a snowball effect has kicked in, with company after company admitting to bookkeeping irregularities and management crises. The flood is unlikely to end soon: With a corporate earnings season beginning and increasing pressure from politicians and regulators, the next few months will be a prime time for further disclosures.

A new edict from the U.S. Securities and Exchange Commission (SEC) last week boosted the liability of top corporate officers for the contents of their companies' financial reports. The order requires the chief executive and chief financial officers of the 947 largest publicly traded U.S. companies to certify under oath the accuracy of their recent reports. Putting CEOs and CFOs under oath leaves them open to prosecution for perjury -- a prospect that could prompt some officers to amend recent filings before swearing to their validity.

With elections in the U.S. looming, politicians here are rushing to appear tougher on corporate fraud. Several congressional committees already have fired off subpoenas related to WorldCom's admissions, and President George W. Bush is planning a July 9 speech in New York on corporate responsibility.

WorldCom is currently dominating headlines, but a number of companies are facing their own bookkeeping troubles:

-- Xerox Corp. shuffled billions in revenue and trimmed its 1997 to 2001 pretax income by US$1.4 billion in the wake of an SEC audit and $10 million fine. Although the restatement had been expected since Xerox's April settlement with the SEC, its size startled investors, who have shaved 25 percent off Xerox's (XRX) share price since Thursday.

-- Vivendi Universal SA replaced CEO Jean-Marie Messier on Wednesday following accounting questions and a Moody's Corp. downgrade of the debt-riddled company's credit rating to junk bond status.

-- Bankrupt telecommunication company Global Crossing Holdings Ltd. is under investigation by a U.S. House of Representatives committee probing its auditing practices. Global Crossing's auditor was Arthur Andersen LLP, the Enron Corp. auditor recently found guilty of obstruction of justice.

-- Qwest Communications International Inc. changed CEOs and replaced Andersen as its auditor in the wake of credit rating downgrades and an ongoing SEC investigation of its accounting.

-- Microsoft Corp. settled with the SEC last month regarding allegations that it had misstated its income. Microsoft set aside income in flush quarters to pad results in leaner times, according to the SEC. The settlement required Microsoft to end such tactics but did not require the company to restate any results.

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