A Believable Bottom Line Is Back

Investors seeking reassurance in these trying days should take heart. The folks with the green eye-shades inside Corporate America, the chief financial officers, are beginning to do their jobs again. For a while, during the frenzied late '90s, some CFOs lost their way. Instead of policing the books in the traditional way by crunching numbers, they became profit maximizers, using aggressive accounting to pump up profits. But with the memory of perp walks on TV and the passage of the Sarbanes-Oxley Act threatening personal liability penalties, CFOs are again taking a hard line. As a result, credibility in financial numbers is quickly being restored. Investor confidence and the willingness to risk buying stocks should soon follow.

A BusinessWeek survey of CFOs with Deloitte Consulting, soon to be renamed Braxton Associates, shows that CFOs today are working longer hours and believe their jobs are a lot harder. Regulatory pressure, investor anger, and political pressure are factors. CFOs also feel they are getting more help from more active audit committees. This is all to the good. But a third of those surveyed also believe that even with the new rules and legislation, an Enron-type disaster could still happen. Clearly, there is no substitute for shareholder and director vigilance.

The perilous state of the world has investors fleeing to the safety of bonds, gold, cash, and real estate, understandably. But much of that wariness will begin to lift in the months ahead, and investors will begin to come out of their shells. When they do, they will discover financial statements that are more believable today than at any moment in the past decade. CFOs are back to doing their jobs again. And that's good news for the bottom line.

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