Believe me: Intenal Auditing knew about the company's Fixed Asset Policy long before now.

I suspect that the ongoing SEC investigation brought the issue suddenly into sharp focus which resulted in the "we wanted to bring this to your attention right now" news release.

I speak from experience when I tell you that many companies intentionally blur the line between period expenses and capital expendatures. Especially in areas of Research and Development. Internal Auditing Departments often wink at the practice, and external auditors assign their least qualified recent hire to do the Audit verification process which often consists of little more than sampling a few big invoices and making sure the account balances tie to the Consolidated Dinancial Statements. Finally, the tax auditors from the IRS love the practice because it maximizes current period tax liability...I've never heard of it done on the scale of Worldcom though...$4 Billion in expenses shown on the Balance Sheet a Assets...That's gotta be a new record.

I bet there are a lot of Fortune 500 CEO's out there squirming because they like to pretend that they don't understand the difference between a Capital Expendature and a Period Expense.

Scott

P.S. The same game gets played with inventory valuation, although the Independent Auditors are more rigorous in their examination of what is capitalized as Inventory. But if a company's management is hell bent on committing a fraud, its damned hard for the CPA's to detect.