By Wednesday of this week, the CEOs and chief financial officers of more than 700 publicly traded companies must have personally attested to the accuracy of their companies accounting, as ordered by the Securities and Exchange Commission in June. The order came in the wake of several large accounting scandals, including the biggest to date, at WorldCom Inc.
In an apparent effort to distance themselves from scandal-ridden companies such as WorldCom and Qwest Communications International Inc., several telecommunications carriers took the opportunity to submit recertifications before the Aug. 14 deadline and trumpet the confidence they have in their books.
Upon filing with the SEC last week, Genuity Inc.s CEO, Paul Gudonis, said, "Integrity continues to be one of the most important values we have." Sprint Corp.s CEO, William Esrey, in Overland Park, Kan., said the "accuracy of our financial statements, the ethics of our employees and the fairness of our business practices are paramount in importance." But beyond using the occasion to hail their self-confidence, few companies were willing to suggest any impact the recertification process might have on them or the industry. "Our filing just underscores our ongoing integrity," said Genuity spokesman Kevin Nash, in Woburn, Mass. "I wouldnt say that this is going to cause any kind of changes in the company."
Many companies are treating the new federal requirement as nothing out of the ordinary. AT&T Corp. had not filed as of last Thursday, but spokeswoman Sue Flemming said the company intended to meet the Aug. 14 deadline. "We dont see this as a change from what weve been doing all along," said Flemming, in Bernardsville, N.J. "In our minds, its business as usual."
Conspicuously absent from the early filings were the major telecom equipment makers, which have been dogged by financial difficulties for more than a year. Lucent Technologies Inc., in Murray Hill, N.J., had not filed as of last Thursday, and a company spokesman would not speculate on when it might. Analysts said they would not be surprised if Lucent were to make some technical restatements, but even then, they speculated it would likely have little impact on the company.
"They have done so many restatements in the past, if they did another one, it wouldnt be a big deal," said Timm Bechter, an analyst with Legg Mason Wood Walker Inc., in Baltimore. "This is a company that has been examined over and over again. I think this is something thats kind of passé for Lucent." Technology companies generally have particularly complicated accounting methods, in part because of their intricate business models. The software industry is subject to complex accounting because of multiple sources of revenue through license agreements and maintenance and consulting services.
"The accounting complexity isnt in payroll or in general accounting issues. The complexity is in revenue and determining what is revenue," said Robert OConnor, CEO at Softrax Corp., in Canton, Mass. "[Managing revenue] manually is fraught with risk and leaves companies open to mistakes."
For makers of accounting software such as Softrax, the SEC recertification project is providing a boon, according to OConnor.