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By BENJAMIN MARK COLE

Contributing Reporter

“Audit.” The very word can send shivers down a chief executive’s spine or prick the ears of a Wall Street analyst.

An audit, of course, is the annual review verifying the accuracy of a company’s financial reports, required by the Securities and Exchange Commission.

And in the world of auditors, Timothy Slapnicka is a kingpin head of what CPA giant PricewaterhouseCoopers LLP calls its assurance and business advisory services division in Los Angeles.

Slapnicka, 45, also heads up the firm’s consumer and industrial products division. In all, 880 numbers-crunchers report to him, a veritable army of fact-checkers who live and breathe generally accepted accounting principles every business day. If a California company wants to act loosey-goosey with its numbers, and PricewaterhouseCoopers is its auditing firm, then Slapnicka is likely the one who will slap the company down. Or resign the client.

After 23 years in the business, Slapnicka knows of the tensions that are generated by the annual audit of a public company’s numbers. Indeed, much of his work is actually a type of business kubuki play, where steps are taken throughout the year to avoid any surprises.

“There is always a balancing the company may perceive the market pressures they have for continued growth and profitability, which must be balanced against fair and accurate reporting and protection of the shareholders,” says Slapnicka. “But market pressures can force management or push management to not always make prudent decisions.”

Slapnicka says the ultimate source of pressure is Wall Street.

“The number of investors who will sit with you (stay in a stock) through a down period is less and less,” he says. “That results in greater tension on the part of management, and a much greater need to know how your information systems are working, and to be sure the computerized systems are accurately reflecting the real financials.”

In today’s high-tech world, it is not just corporate executives that Slapnicka and his audit troops must bird-dog, it’s also the company’s computers. Part of his practice at Mattel Inc., Authentic Fitness Inc. and Patagonia Inc. is making sure the clients’ systems are working right not getting “tilted” by a seemingly innocuous mistake, or perhaps being programmed by an overzealous division chief to “juice” results.

“There has been a phenomenal transition in technology. When I started in the business, I had clients who reported everything manually. Now we have interactive systems that are paperless,” says Slapnicka. “The fastest growing segment of our business assurance (audit) practice is our people who specialize in analyzing computer information, the risk elements of computerized information, and the integrity of the systems.”

The basic goal in all this is to avoid a year-end audit report that crushes financial projections and previously reported profits in short, an ugly debacle.

“You must effectively participate in transactions early,” he says. Getting the client company to report in an accepted way, and knowing the ground rules on certain types of decisions for example, what is deductible, and what isn’t helps the cause, says Slapnicka.

It also helps to have industry-specific expertise to be alert to various fudge factors employed by different types of businesses.

“It is important to know about the industry in which you are performing the audit,” he says. “I have stayed in consumer or industrial products my whole career.” Additionally, for a major client, Slapnicka’s troops perform quarterly reviews of the financials, again helping avert the nightmare that nobody wants a restated earnings figure.

“That’s absolutely one of those things that you never want to happen,” Slapnicka says. “It undermines our credibility, and the credibility of the firm, and the credibility of the client. We take that very, very seriously.”

Slapnicka’s biggest client today is Mattel, the toymaker famed for its Barbie doll. It has manufacturing operations around the world, and retails in dozens of countries. It reported 1997 sales of $4.8 billion.

“On Mattel, you have to remember, there is a lot of international activity, and we have to review operations in 23 countries,” he says. “In all, about 120 people report to me on Mattel.”

Slapnicka hazards a guess that about five employee-years (the equivalent of five employees working year-round) are spent on Mattel for each annual audit and that doesn’t include time spent during the year on serving the company’s other needs. Not only that, the vast majority of the audit work has to be done within 20 days after close of the fiscal year, said Slapnicka.

“Oh, you have 90 days to report to the SEC. But the company wants to get the earnings figures out, in 20 days 20 business working days. That’s all you have,” he says.

Slapnicka generally works 12 hours a day on weekdays, and six hours on the weekends. The hours go up during high audit season, but less in the off season. Vacations are scheduled well in advance.

“I just sent a notice to my clients that I will be taking a vacation in April,” he said. “I sent the same notice to all of my managers, telling them that they can’t have that week off.”

The interaction with Mattel doesn’t start or stop with the ground troops who report to Slapnicka, or the annual audit. He personally meets with top-level Mattel executives “about once a week, sometimes more.” On top of that, he meets with the audit committee of Mattel’s board six times a year. “Again, you want no surprises,” he says, in explaining the frequent meetings.

“Tim has been the engagement partner with Mattel for the last 18 months, and our experience with him has been excellent to date,” said Harry Pearce, Mattel’s chief financial officer. “He has excellent financial and accounting experience with consumer products companies, and a level of business acumen not normally seen in someone in an audit position.”

Slapnicka does not reveal much about his clients, and certainly doesn’t air dirty laundry. But he does say he has had to walk away from clients, or threaten to do so, on more than one occasion.

“I personally have never had a situation, but I have had some of those who work for me run into situations which called for action,” he says. “We are prepared to walk away, and we have. We have gone out and terminated a relationship.”

Slapnicka says he decided to become an auditor as a junior in high school, thanks to helpful advice from the father of a then-girlfriend. He received a bachelor’s degree in accounting at the University of Oregon and joined what was then Price Waterhouse in 1975. He has stayed on board ever since, making partner in 1987. He became office manager in Portland in 1991 and was the point man for PricewaterhouseCooper’s work for Nike Inc., the big shoemaker.

Along the way he got married, and now has two children. The big leagues called, and Slapnicka was drafted down to Los Angeles in 1997, which due to its weather, allows a few more chances every year to engage in his favorite sport golf.

“I am looking out the window today, and it is perfect day,” he says. “So far, I have found that all the bad things people say about Los Angeles are not true.”