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The AAO Weblog covers accounting issues and current events as they relate the practice of investment analysis. All posts prior to September, 2007 are in the public domain, but after September 4, only subscribers to The Analyst's Accounting Observer will see all posts going forward. Only selected, occasional posts will be released to the public domain from September 4 forward.

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Mail Call, 4/25/06

Location: Blogs AAO Weblog (Public)
Posted by: Jack Ciesielski	4/25/2006 6:20 AM
An especially gratifying e-mail, from the controller of a private company who would prefer not to be identified at all: How come I agree with so many of your posts, especially the ones on SOX exemptions and the Small Company Advisory Board? Based on our respective positions (preparer and analyst), aren't we supposed to be sworn enemies, on opposite sides of the hide and seek game?Oh, wait. I forgot. I am also an investor. Oh, wait again. I forgot, I also need to access capital in the markets, even if it is currently only plain vanilla bank debt. I guess I am foolishly still holding out for that mythical level playing field for all the smaller companies that I compete with for access to debt financing. I think that an important story for everybody to remember is what Michael Armstrong did at AT&T, taking all those risks to try to match those wonderful results achieved by his insightful, innovative and brilliant competitors at WorldCom. And we know how well that turned out. Of course I realize that such things obviously could never happen at companies below $128M (or $787M as long as the companies themselves give us a blood oath promise that everything is under control, just do not look behind the curtain.) I don't know. I hope that I do not have to turn in my membership in the Preparer's Club for thinking these thoughts. Well, I'd like to think that you agree with me because I'm a reasonable guy with incredible powers of persuasion. But I don't believe that any more than you do. I think we agree because, as you point out, we're all investors at some level or another - and out of our own self-interest, we're better off when we have consistent, reliable financial statements on which we can base our investing homework. The capital markets should be just that - markets - and not casinos where investors not only have to find companies that meet their investment criteria, but they also must pick the companies whose financials they find most believable. Reliable financial statements, prepared with integrity, let investors get on with their work of investing - and in turn, create healthy markets where capital is allocated best in the broad economy. I sincerely hope you retain your membership in the Preparer's Club - and that you infect a few more of your fellow members.

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