In the continuing saga of accounting frauds, Xerox is the latest to come to the fore. The copier giant, however, got off the hook by agreeing to pay the largest fine ever for financial fraud but without admitting or denying the wrongdoing. Xerox is now bracing itself for the tough challenges ahead while trying to portray its accounting woes as a thing of past.

Xerox Corporation, a Stamford, Connecticut-based public company, had an unorthodox but effective way of meeting or beating analysts' earnings forecasts in the late 1990s. When operating results looked as if they would fall short, which often was the case, because the US office equipment giant was struggling to adapt to a more competitive market for its copiers executives would "close the gap" using one-off accounting tricks. That is the central allegationneither admitted nor denied by the companyof the Securities and Exchange Commission's recent complaint against Xerox, a case that its officials say is one of the largest financial frauds they have seen. With widened probe, for a while, it looked as if Enron and Andersen will be pushed out of the headlines by Xerox and KPMG.

James Bingham, an assistant treasurer of Xerox was fired in August 2000 when he complained about the accounting tricks that the copier company was using to boost its flagging earnings. He alleged that the accounting woes of Xerox were largely because of a culture in which managers were under intense pressure to "stretch" financial targets and then to reach them. And the compensation was related to managers meeting the earning expectations. Such a culture is by no means unique to the now distressed copier company. Many firms, pushed to reach unrealistic targets in these tough times, are tempted to manage their numbers too, sometimes within the law but on occasions, also outside it.

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