Just as Ken Lay faces trial and Lea Fastow, wife of Andy, heads to prison, Enron has entered the lexicon as a verb — as in "to go Enron," meaning to collapse because of one's illegal activity.
One thing is sure: Enron still casts a sizable shadow over business conduct in the United States. On the auditing front, companies are now paying their auditors more for audit services than for consulting work. A new study from the Investor Responsibility Research Center reports that in 2003, 42 percent of the fees paid to auditors were for nonaudit services, down from 72 percent in 2001. Moreover, PCAOB head William McDonough (whose interview with deputy editor Lori Calabro also appears in this issue) has gone so far as to declare that, in most cases, auditors should be expected to detect fraud.
We know what this means for relations between auditors and finance executives: an increase in uncertainty and mutual suspicion, a marked chill in what had been a warm, congenial relationship.
Uncertainty and suspicion seem also to mark the attitude of many companies, if the amount of cash they currently hoard is any guide. As reported in our cover story, "Too Much Cash," corporate cash holdings have reached record levels in the past few years. But even as the money piles up, companies seem reluctant to spend it, whether on new capacity or acquisitions or dividends. Has irrational prudence replaced irrational exuberance? Or are companies expressing with their coffers their lack of confidence in the future?