any Europeans felt a bit vindicated by the Enron and WorldCom scandals. They saw such complex, huge cases of accounting fraud as a sign of how self-destructive America's swashbuckling hypercapitalism can get.

Now Parmalat, the dairy and food conglomerate that is Italy's eighth-largest company, has given rise to some costly trans-Atlantic understanding. The company is implicated in a multibillion-dollar scandal (the full extent of which is still not clear) that might impress even Enron's Jeffrey Skilling and Andrew Fastow.

Parmalat's implosion, like Enron's, was sudden. It was touched off in November by news that the company had invested in offshore hedge funds and might have trouble paying its bills, despite its claim to have billions in the bank. It turns out that someone was writing notes on forged Bank of America letterhead vouching for those billions. It's crude — the financial equivalent of a schoolboy's forgery of his report card.

Parmalat, which employs 36,000 people around the world, was heavily in debt and into the same tawdry types of offshore investment vehicles — one brazenly called "blackhole" — that Enron favored.

Calisto Tanzi, Parmalat's founder, and eight others have been arrested. Mr. Tanzi has acknowledged diverting more than $600 million in company funds to other family enterprises, but that still leaves billions missing. It is not yet clear how far back the fraud goes.

The most distressing similarity between the Parmalat and Enron scandals is the failure of the financial system's gatekeepers. Italian prosecutors, defrauded investors and our own Securities and Exchange Commission want to know why banks, including Citigroup and Deutsche Bank, were underwriting Parmalat bonds.

And where — you can lift this chapter heading from any Enron post-mortem — were the company's auditors?

Parmalat, like many other Italian conglomerates still dominated by its founding family, has a confusing corporate structure, with many layers of obfuscating holding companies and subsidiaries. Some of these, conveniently enough, were audited by different accounting firms.

Italy's financial regulators are notoriously weak. It does not help matters that the government of Silvio Berlusconi, whose own far-flung commercial empire has faced its share of inquiries, has watered down the laws against accounting fraud.

Still, the rest of Europe cannot simply write this off as a quirky Italian drama. The reality of wildly divergent accounting standards and corporate governance practices across Europe belies the idea of a single market. As it goes about harmonizing member nations' financial and accounting standards, the European Commission will have to heed the eventual lessons of the Parmalat inquiry.