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Arthur Levitt vs. the Accountants

By Mike Brewster

While still early in his first term, Levitt started to hear about what he called "corporate numbers" games. For example, companies would place ordinary expenses into the category of one-time or nonrecurring costs (WorldCom would play a similar game when it treated expenses as capital expenditures). As time went on, Levitt and Turner started to see more and more companies restate their earnings. From 1997 through 2000, 700 companies were forced to restate earnings due to misrepresentations in their financial statements. In 1981, by contrast, only three companies needed to restate earnings.

It had also become apparent that many companies, with the blessing of their auditors, were just managing to meet their quarterly projections, time and time again. In fact, between 1992 and 1999, the number of companies that beat quarterly earnings projections by one penny quadrupled. And while companies did not have to disclose audit or consulting fees, it was becoming obvious that the global firms, in particular, were focused throughout the 1990s not on balance sheets but on growing

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