Enron Aftershocks

In the midst of earnings season, Wall Street analysts and the Securities and Exchange Commission are taking a much closer look at all companies' results. All accounting practices are under intense scrutiny. No one wants to see another Enron-like collapse.

The effects of this are scattered throughout the industry.

Enterasys informed its auditor, KPMG LLP, that it was reviewing revenue recognition practices in its Asia-Pacific region and was delaying fourth-quarter and full fiscal-year results. The company also delayed its anticipated spin-off of Aprisma due to an investigation by the SEC.

EMC, meanwhile, last week confirmed that there were some irregularities in how it booked customer orders totaling less than $1 million in what it described as an isolated incident.

The Enron/Andersen debacle also has forced the remaining Big Five accounting firms to split their accounting groups from their consulting groups. Last week, Deloitte Touche Tohmatsu and Ernst and Young said they would sever ties between their respective accounting and consulting businesses.

This sounds like a huge opportunity for solution providers. In an interview with DiamondCluster International Chairman and CEO Mel Bergstein, the executive said solution providers can begin to target some of the accounts that were once the stronghold of the Big Five. In a CRN Online story, Bergstein, a 21-year veteran of Arthur Andersen, went on to estimate that 20 percent to 50 percent of the consulting business at the big accounting firms comes from audit clients. Some companies are refusing to work with both in tandem.

My advice to you: Create a target list of prospects that are currently working with the Big Five. Brush up on your accounting software expertise. Every company, even those not associated with the Big Five, understands the increased scrutiny. You can help them protect their businesses and circumvent a problem before it happens.

What do you think? I can be reached at (781) 839-1272 or via e-mail at [email protected].