Enron Alarm Bells Unheard

A high-profile body charged with setting the government's views on accounting policy after the collapse of Enron has yet to meet, despite its existence being announced by trade and industry secretary Patricia Hewitt two months ago.

The group was billed as uniting ministers at the Department of Trade and Industry and Treasury with representatives from professional regulator the Accountancy Foundation and the financial services authority, the City watchdog, to address any issues arising from Enron that may "question the integrity of markets".

While officials are unable to confirm that a date for the body's first meeting has even been set, it became clear yesterday that regulatory authorities in the US are taking strenuous steps to learn the lessons from the collapse of Enron.

US financial regulators have begun an unprecedented crackdown on accounting fraud with a near-threefold increase in investigations so far this year. The securities and exchange commission, the US financial watchdog, said yesterday it had begun investigations into 49 companies in the first two months of the year, broadening the scope of investigations into some of Wall Street's biggest companies. That contrasts with 18 investigations in the first two months of 2001.

The US investigators have moved beyond problems highlighted by Enron to arcane accounting practices that have flourished in recent years.

Among the issues raised by Enron's collapse were ways companies could hide the true extent of their debt and the way they valued certain trading positions.

Although Enron was a US company, Ms Hewitt said when she announced the new body in a speech to industry leaders at the Mansion House in February, that the scale of the Enron collapse required a review of the UK's financial reporting and auditing rules.

The DTI said yesterday efforts were being made to convene the first meeting, perhaps by the end of the month, and it would have a remit to "overview" the accounting industry.

No single UK body has a similar remit to the SEC in the US. A number of organisations including the DTI and the finan cial reporting review panel cover that ground. Accounting standards are also different between the US and Britain.

The DTI is charged under the Companies Act with reviewing the way big firms present accounts. Its company investigation board is not believed to have increased its workload in that area. This contrasts with the more legalistic US approach, which is said to help explain the higher number of investigations.

"Every year we have had progressively more financial fraud cases," said Charles Niemeier, head of accounting at the SEC's enforcement division. "That is not the big story. The bigger story is the size of the companies being investigated. We are investigating more Fortune 500 companies than we ever have."

The more intense scrutiny is designed to restore investor confidence after Enron but it has thrown a long shadow over Wall Street. The watchdog, which normally carries out spot checks on only a few companies' annual report filings, is trawling through all Fortune 500 firms in the US this year to ensure there are no other Enron-type surprises in the balance sheets.

US firms under the regulatory spotlight

Adelphia cable TV

Computer Associates software

Elan drugs

Enron energy trading

Global Crossing telecoms

L90 online advertising

Network Associates security software

Nvidia graphics chips

Qwest Communications telecoms

RSA Security internet security

SRI/Surgical Express, healthcare products

Symbol Technologies data scanners

Take-Two Interactive Software computer games

Williams oil pipelines

WorldCom telecoms

Another 35 SEC company investigations remain confidential