Risk & Compliance

The Needs of the Many

Business and finance apps top the list; finding IT workers not a big problem. Also: AA's past is present at trial, senators chide Enron directors, ...
Stephen TaubMay 8, 2002

What are the most critical technology needs of finance managers?

Not necessarily what you’d think. In the 12th annual Top Technologies list released by the American Institute of Certified Public Accountants (AICPA), respondents rated business and financial applications as their top tech priority. Last year, those types of software programs ranked only fifth on the list. Obviously, the fallout from the Enron scandal has rearranged the priorities of finance types.

“The very nature of financial reporting—its purpose and significance—is now a major part of the national debate, so it makes sense that reporting applications would figure so prominently on the list,” says Wayne Harding, a member of the AICPA’s top technologies task force and information technology executive committee.

The poll also revealed just how integral technology has become to the finance function. Last year, training and technology competency (of users) came in fifth on the list. This year, respondents put it number two on the list. Notes Roman Kepczyk, chair of the top technologies task force: “Technology is now so inextricably tied to our business and personal lives that the ability to use it effectively and efficiently is a true source of concern.”

IT workers, however, may find the results of the poll a true concern. According to the respondents in the annual survey, finding qualified tech personnel is no big thing (number nine on the list). And purveyors of Web services and business instant messaging may want to take note of the survey. Those technologies ranked eight and ten, respectively, on the list.

Also of note: information security and controls was the most important tech issue for finance types last year. This year, that category fell to third on the list. In the post-Enron era, it appears finance managers may be more concerned with a breach of ethics than a breach of security.

Here, then, is the complete ranking:

1. Business and financial reporting applications
2. Training and technology competency
3. Information security and controls
4. Quality of service
5. Disaster recovery (includes business continuation and contingency planning)
6. Communication technologies—bandwidth
7. Remote connectivity tools
8. Web-based and Web-enabled applications (Internet)
9. Qualified IT personnel
10. Messaging applications (E-mail, faxing, voice mail, instant messaging)

The 2002 Top Technologies issues were drawn from a master list of 42 issues. The AICPA conducted an on-line survey to determine which of the 42 were most important. A total of 195 people responded. Of those, 135 were CPAs who hold the institute’s CITP (Certified Information Technology Professional) credential.

(Editor’s note: To view a clickable list of CFO.com’s most popular technology articles, go here.)

Andersen’s Past Is Present

It got ugly in Houston yesterday.

In the opening arguments at the Andersen obstruction of justice trial, federal prosecutors trotted out evidence of the auditor’s role in several past accounting scandals. Those scandals include previous bookkeeping problems at appliance maker Sunbeam and trash hauler Waste Management Inc.

“There was a day when the firm knew that the law was going to come knocking at its door because of a series of billion-dollar accounting errors,” assistant U.S. attorney Matt Friedrich told jurors. “They knew these things were coming because Andersen was already under a form of probation with the SEC.”

Sam Buell, an assistant U.S. attorney, called the government’s first witness: Securities and Exchange Commission lawyer Thomas Newkirk. Newkirk supervised the commission’s investigations at Sunbeam and Waste Management.

Reportedly, Newkirk stated Andersen entered a consent decree last June that forbids the auditor from participating in any securities fraud. The decree was signed as part of the SEC’s investigation into Waste Management’s bookkeeping practices. Newkirk added that a violation of the consent decree could result in the revocation of Andersen’s right to practice.

“Every partner at Arthur Andersen is subject to the terms of the injunction,” Newkirk reportedly said.

Of course, if Andersen is convicted on the obstruction of justice charge—a felony—the consent decree will be moot. The SEC will not accept audited financial statements from a convicted felon.

In a related story, a number of Enron directors told a congressional panel Tuesday that company executives and auditor Andersen kept critical information from them.

Apparently, senators at the hearing were in no mood for buck-passing, however. Several of the lawmakers admonished the Enron board members, saying the directors shared responsibility for the company’s sudden collapse last year.

But John Duncan, former chairman of the board’s executive committee, defended the board’s actions. Duncan, a founder of Gulf & Western Inc., claimed the directors “thoroughly executed their duties.”

One senator then asked Duncan if the board members should have asked auditors and Enron executives more questions. Duncan’s answer? “I do not believe that Enron’s fall would have been avoided.”

Meanwhile, two more Andersen clients defected yesterday, and both chose PricewaterhouseCoopers. One Andersen defector: Alltel, which has more than 10 million communications customers and $7.5 billion in annual revenues.

Standard Microsystems Corp also dumped Andersen yesterday, hiring PwC instead. For the fiscal year ended February 28, 2001, Standard Microsystems paid Andersen about $205,300 for auditing services, according to a securities filing.

Short Takes

>> Demand for IT workers will rebound in the next 12 months, according to a survey by The Information Technology Association of America. It noted that the IT workforce shrunk by 5 percent in the past year. That last number jibes with the results of the Top Technologies survey mentioned above. In that poll, finance managers indicated that finding qualified IT staffers was not a problem.

>> Moody’s Investors Service cut the rating of Gateway Inc.’s senior unsecured debt to Ba3 from Ba1. “The action reflects the challenges Gateway faces to expand revenues and market share while at the same time reducing its cost structure so as to permit a return to profitability on a sustainable basis in the intensely competitive U.S. personal computer market,” said the rating agency in a statement. “The new rating reflects Gateway’s weak operating performance and the expectation of losses over the near term.” Moody’s added that the rating outlook is stable. No word, however, on whether the rating agency will lower its rating on the cow.

>> Fund-raising among U.S. venture capitalists slowed to a six-year low in the first quarter, according to Venture Economics and the National Venture Capital Association. The reason for the slowdown? Venture capitalists still haven’t invested the money they already have. According to the study, a total of 44 funds received $2.2 billion in commitments last quarter, down 87 percent from $16.5 billion a year earlier. This marks the seventh consecutive quarterly decline since the venture capital peak in Q2 2000. It’s also the least amount of funds raised by venture capitalists since the third quarter of 1996, when they pulled in $1.3 billion.