From The President

By Toby J. F. Bishop, CFE, CPA, FCA


As baseball icon Yogi Berra said, "It's tough to make predictions, especially about the future." But since we're in a time of rapid change concerning how companies and regulators deal with fraud, it's only fair that I share with you my thoughts as to what 2005 may bring for the world of fraud.  

More big frauds. It requires little imagination to predict that, despite the enormous effort and the billions of dollars spent implementing the Sarbanes-Oxley Act, major corporate frauds will continue to occur in 2005. The first quarter of 2005 should bring a flurry of revelations in the run-up to the U.S. Securities and Exchange Commission (SEC) reporting deadlines. As we go to press, leading the pack is Fannie Mae, the U.S. government-sponsored enterprise providing mortgage finance, which faces a restatement reducing earnings by $9 billion over the past four years. That's more than 10 times the overstatement of earnings at Enron. Investigators are working to determine if the misstatement was made knowingly.

The big question is how the public will react to continuing revelations of major fraud. Will their slowly recovering confidence in financial reporting and securities regulation be damaged by ongoing frauds? My prediction is that they'll give the recent changes time to take effect and will look for improvement by 2006.

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