Lawyer to the Auditors Finds More Work in Enron's Wake. (Wall Street West).

THE Enron debacle has accelerated a flood of business already heading to the offices of Mary Craig Calkins, partner with law firm Howrey Simon Arnold & White in Los Angeles. Her specialty is helping corporate and CPA insurance policyholders understand their coverage against claims alleging financial wrongdoing or malpractice, as well as defending against such claims.

The Wall Street tech meltdown already spurred many an investor lawsuit, most alleging management issued misleading statements. With Enron's bankruptcy, the nation's CPA firms have become high-profile targets, too.

Investors are wondering how Enron's auditing firm, Arthur Andersen, could vet the energy concern's numbers (for a price of $25 million a year) while reaping another $27 million doing consulting work for the doomed firm. Of course, those with skeptical minds might suspect Arthur Andersen auditors were not as gimlet-eyed as they should have been. Enron's auditors never said boo to shareholders, the Securities and Exchange Commission or anybody else, even as Enron stock sank from $90 to 40 cents.

Given such a litigious climate, Calkins advises corporations and CPA firms to review their policies, which she calls "a very important asset." In the case of most CPA firms, insurers will not only pay off successful malpractice claims, but provide legal counsel and finance defense against such claims.

So should CPA firms be both consultants and auditors? The issue has been a hot one in the industry for years, but Calkins deftly sidesteps taking a position. "You need to look very closely at the relationship, and whether there is an issue that can be raised, as to whether the dual capacity may have impacted judgment," she said. "But there may be splendid reasons in some cases why the auditing firm is also doing some consulting."

Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. His new book is "The Pied Pipers of Wall Street: How Analysts Sell You Down the River," published by Bloomberg Press.