Media Relations

Media Relations

By Lois Whitehead, Public Relations Manager

This column features excerpts from an interview by e-mail with Floyd Norris, chief financial correspondent for The New York Times. Formerly a stock market editor for Barron’s National Business and Financial Weekly and a business editor for the Associated Press, Norris has been with the Times since 1988. He recently has been reporting from both New York and Paris, where he will move to this summer.

Here he provides his perspective on public accounting developments both in this country and abroad and the significance of certain financial reporting scandals.

Q: Does your transfer to France this summer signal an anticipation of more financial fraud in Europe?
A: No, I suggested the idea long before I knew Parmalat had a problem. The paper wanted to strengthen the International Herald Tribune and I wanted to learn more about European economies, companies and markets. I also believe the IASB (International Accounting Standards Board) is going to be the most important accounting rule maker in the next decade.

Q: With cases like Adecco and Parmalat emerging, will there be movement in Europe to establish Sarbanes-Oxley–style changes in accounting regulation?
A: I don’t know. In Italy, we are seeing efforts at rule changing, but they are far less sweeping. I think it is possible that Sarbanes-Oxley, particularly the part requiring auditors to assess the quality of management controls, may have led to the discovery of Adecco’s problems, although we don’t know enough yet to be sure.

Q: Have accounting failures prodded a move toward stricter international accounting standards?
A: I think globalization did that. And the need within Europe for standard accounting forced them to agree to actually use international standards. It will be interesting to see if efforts to keep the EU (European Union) from adopting controversial standards succeed.

Q: Does the Morgan Stanley/LVMH case (concerning the alleged issuance of incorrect information by the bank on the company) place more of a red flag in analyst research opinions?
A: I fear that decision might tend to intimidate analysts from doing critical work on companies. The facts there were very different than in the American analyst cases.

Additional Comments

Potentially, the most important part of Sarbanes-Oxley is the PCAOB (Public Company Accounting Oversight Board). When Arthur Levitt was trying to impose relatively mild auditor independence rules, some of the big accounting firms told me that as far as they were concerned neither the SEC (Securities and Exchange Commission) nor anyone else had the right to regulate the profession. Now someone clearly does, and that someone has the authority to look over the shoulders of auditors. Ideally, that will encourage auditors to resist companies that are pressing them to approve dubious accounting without sufficient disclosures to show it is dubious.