A “Globes” investigation indicates that managers of large accounting firms among the leaders in handling accounts for Israeli high tech companies say that the accountants do not bear responsibility for the fact that a number of companies had to retroactively amend their reports for 2000. They allege that the main responsibility lies with the analysts covering the companies.
It should be noted that the analysts usually rely on data received by the companies themselves. The accountants, who bear responsibility toward the company shareholders, nevertheless claim they themselves acted properly, even when it was shown in retrospect that the reports were biased towards better results.
Kesselman & Kesselman senior partner Avi Berger told “Globes” that companies that tried to meet the analysts’ forecasts exactly are now being hit the hardest. “When you enter this syndrome, you stretch the reports to meet the forecasts, and eventually you are liable to detach the reports from reality,” Berger said.
Brightman Almagor office manager Yali Sheffi commented on this problem, “It all begins and ends with pressure for quarterly results. All the results from previous years first of all create expectations. The capital market expects the company to maintain the trend, even if the analysts say nothing.”
The manager of another large firm notes that the analysts sometimes belong to an investment bank that is a market maker of the company they are covering. Consequently, “They sometimes criticize the figures from the company, telling it, ‘We recommended your share; you have to increase the numbers a little.’ This leads the company to make deals questionable from an accounting viewpoint.”
Published by Israel's Business Arena on February 21, 2001