Investors Losing Faith?

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Bob Rea is a partner in the Meridian accounting firm, Rea, Shaw, Giffin and Stuart. Its client list includes some of the most successful firms in our area. Newscenter 11 asked Rea how the market looks now to the average investor?

"It's the sheer volume of the transactions of a company like WorldCom who is making these tremendous acquisitions with billions and billions of dollars going out and the auditors are just inadequate to cover those kind of transactions in depth," said Rea. "You audit WorldCom with 100 guys and 100 guys is not adequate to audit a WorldCom. It's too big. There are too many transactions. Bernie Ebbers is moving too fast. He's buying a company every day."

So we then asked if the cause is fraud, inefficiency, or neglect?

"Obviously, the act of doing it on the company's books with the knowledge that it was wrong would probably tend to be considered fraud in the in the legal term," Rea said.

The local executive said it's likely to have a ripple effect.

"People are going to quit trusting the annual reports is what I'm scared of," said Rea. "I don't think it's as widespread as it looks like we're getting the sensationalism now of a few and I think most of the companies are not cooking their books."