The big accounting fraud news this week was the Security and Exchange Commission announcing that conglomerate GE had cooked the books, boosting its earnings by $785 million and its revenues by $370 million. One of the alleged violations involved GE accounting for sales of locomotives as done deals before they had actually occurred, another involved inflating its earnings by changing the way it recorded sales of commercial aircraft engines' spare parts.
GE, according to Robert Khuzami, Director of the SEC's Division of Enforcement, GE had "bent the accounting rules beyond the breaking point". GE, or rather its shareholders, have been fined $50 million.
The worrying part about these revelations is that GE's number crunchers have bent those rules to produce results that beat the market's expectations. They have been playing investors for suckers.
In the New York Times, Floyd Norris compares GE's locomotives shenanigans to Enron's barges deal and raises questions about GE's auditors KPMG. Echoes of Arthur Andersen.
Accounting commentator J. Edward Ketz says the Securities and Exchange Commission chief Mary Schapiro is doing the public an injustice by going too easy on GE. "If she wants to do something substantive, she needs to go after the managers who commit accounting frauds and the directors who approve their tomfoolery. If she really wants to get their attention, and if she really wants justice and the deterrence of accounting crime, then send the leading perpetrators to prison."
In this economic climate, you wouldn't find too many disagreeing with that.
no comment untill now