How many Enrons are there? More than people may think.

It's one of the central questions behind the growing scandal in corporate America: Just how pervasive is the number fudging?

Some believe the mistakes in financial reporting and accounting are limited to a handful of companies – an Enron here and a WorldCom there. Others see the balance-sheet manipulation as extensive.

Now a new study finds that financial shenanigans may, in fact, be more widespread than many Americans are aware of.

A new study by Pennsylvania State University professor Orie Barron shows that the Securities and Exchange Commission (SEC) finds mistakes in 25 percent of the public companies whose annual reports it looks at. In most cases, the errors are significant enough that the stock price is affected when the companies amend their financial statements.

"We should be more skeptical," says Mr. Barron, who teaches auditing at the Smeal College of Business. "Not everything out there is hunky-dory."

Proof of that seems to grow every day. WorldCom, the troubled long-distance carrier, now says it will restate its earnings from two years earlier than previously disclosed. It has already admitted to misreporting at least $3.8 billion last year. Last Friday, Xerox Corp. said it had overstated earnings over five years by $1.4 billion.

The accounting scandal continues to stun investors. On Monday, the Nasdaq market fell to a five-year low as rumors swirled about the ripple effect of the WorldCom saga. Such companies as EDS and IBM were clobbered as investors worried that WorldCom could spill over to computer-services businesses. "The tech stocks still have high valuations and need to come back to more reasonable levels," says Sung Won Sohn, chief economist for Wells Fargo Banks in Minneapolis. "Even at these prices they are not bargains."

Evidence exists that investors and others are getting fatigued by the spate of bad news. On Monday, a new group, RestoreTheTrust.com, opened a website that encouraged small investors to write their representatives encouraging them to vote for accounting reforms.

"There is a growing frustration as people watch their investments shrink and read about scandals on the front page of the paper every day," says Pamela Gilbert, a spokeswoman for the group, which is partially funded by the Rockefeller family trust. "They want a cop back on the beat and truth in corporate reporting."

Still, most investors are not aware of how many mistakes are caught by the SEC Division of Corporation Finance, says Mr. Barron. He and Charles Kile, a professor at the University of Alabama at Huntsville, looked through corporate filings from 1987 to 1992. They found 300 SEC reviewers typically spend about 100 hours per company sorting through 10-Ks, the detailed annual reports firms have to file.

In a typical year, they read 400,000 filings from 12,000 publicly traded firms. The SEC reviewers can issue warrants to probe for information and are more independent than securities analysts. "Someone digging around in the company has a deterring effect," Barron says.

He found that the SEC tends to select large firms for their reviews, which take place about once every three years. Yet because of public concerns, this year the SEC plans to review every Fortune 500 firm. Thus, Barron believes the agency would have reviewed WorldCom documents. But the SEC's reviews are not audits, so they're not likely to catch outright fraud. "They just look at the documents and query back," he says. "But if they see something funny, they actually have investigative powers to search for information."

Yet there is one review that was supposed to happen but didn't: Enron. For three consecutive years, someone at the SEC overrode the staff, which wanted to review Enron's 10-K. The SEC says the accounting rules were changing at the time, so it wanted to hold off on the review.

But Barron says that doesn't make sense: The SEC often looks at complex accounting issues. "A competent reviewer would have gotten to the problem very quickly," he says. The SEC says it doesn't comment on specific filings.