How responsible should accounting firms be for the businesses that they audit?
This question is one of the major issues that has been discussed in national news over the past few weeks in relation to the Enron scandal. Fairfield has its own hand in the scandal, as trustee Joseph Berardino ’72 is Chief Executive of Arthur Andersen, the accounting firm tied to Enron.
Fairfield University President, Rev. Aloysius P. Kelley S.J. said, “Mr. Berardino has been an outstanding member of the Board of Trustees and an important member of the Board’s Finance Committee. He will obviously remain a member of the Board.”
On Sunday, Berardino, member of the university Board of Trustees and chief executive of Arthur Andersen accounting firm appeared on NBC’s “Meet the Press,” defending accounting firms in these situations.
“People want to focus on the accounting, and I think that’s fair game. But a company has failed, and it’s failed because the economics didn’t work,” he said.
Berardino has remained an active member of the Fairfield University Board of Trustees and the university community since his graduation. According to “Fairfield Now,” Berardino recently addressed the university committee during a visit to campus. “When I went to Fairfield, I learned that we’re here on earth to serve others,” he said. Berardino has donated funds to begin a scholarship for business school students as a result of this belief.
“I thought a scholarship for those who might otherwise not have access to a college education would be the best way to share the blessings I have received,” he said.
Two Fairfield professors have previously commented on this issue. In their book, “Wake Up Calls: Classic Cases in Business Ethics,” Drs. Lisa Newton and David Schmidt present a case similar to this issue.
“According to the government, Ernst ‘ Young had worked as an auditor and accountant for at least three hundred banks and S and L’s that eventually went bankrupt. The government claimed that the prestigious accounting firm should have detected and reported the financial problems of the S’Ls before they had gotten so out of hand.”
The book reads, “All of the more than 700 S’L failures presented the American public with an outrageous price tag that one estimate put at $220 billion.”
Not everyone on campus believes that Berardino should remain on the board.
“Fairfield is a university that promotes good-will and honesty,” said Briana McGrath ’04. “Considering the business practices that he might be involved in, I think that the university should reconsider their relationship with him.”
“If Berardino is involved in dishonest business practices, I don’t think that the university should want him as a representative,” said Sarah Ulbricht ’04.
An article in the National Post states that Andersen’s high ranking CEO’s, including Berardino, will be faced with possible probing and investigations into their practices.
As reported by the Post, “Mr. Berardino admitted his firm has lost business because of the Enron collapse and later shredding of documents, but insisted the firm will survive, despite eight Congressional investigations, a criminal probe by the U.S. Justice Department and another by the U.S. Securities ‘ Exchange Commission.”
Leave a Reply