Apple has fought back against Microsoft, against PC computers, even against The Beatles and proved mostly victorious with only minor scrapes and abrasions on its image.  Now Apple after several years of unprecedented growth due to its success with iPods and iTunes, is facing a problem that could successfully tarnish an image that couldn’t be penetraded by any other group.

The problem they are facing is their inability to maintain their own finances up to the standards required by the SEC.  Make no mistake options accounting, executive compensation, executive income tax reporting related to options provided as compensation are each areas that are extremely complex and require a very disciplined and experienced approach.

Apple has cultivated an underdog’s image for many years, despite their early dominance with home PC’s, which was squandered when they failed to open up their standards.  Now their dominance of the MP3 player market both in handhelds and in their drm format is under fire for looking and acting more and more like a monopolistic power, these criticisms surface despite the devoted support of their customers.

Regardless the law is the law and underdog or buddying monoploy, Apple is required to follow the law.  Their unprecedented growth might be one reason why they allowed their accounting to get away form them.  This view would give them the benefit of doubt and presumed innocence professed by the US legal system.  However, if these problems were called out by any of Apple’s competitors, the presumption of innocence would not stand and the villagers would be racing for pitch forks and torches.

Even if Apple proves their innocence and comes out from the options debacle mostly unscathed, the additional scrutiny that will be targeted on both the company and the key executives is likely to slow down the mechanism and possibly shake out some criminal activity.  The SEC and the IRS will both be reviewing Apple with a high powered microscope.  Apple will likely feel, see and be a part of continued bad press in relation to their financial reporting activities.

Analysts are mostly concerned that further scrutiny might turn up some previously unseen legal issue with Steve Jobs.  Their concern is that if something does stick, Jobs may be forced to resign some or most control of the company, and from the analysts perspective this among all the other problems would be bad for the bottom line.  They have good reason to be concerned.  Apple did not fare well during Jobs previous leave of absence, and like any house whether its built of cards, straw or sticks when the builder leaves there is going to be serious cause for concern over succession.

Apple has previously proved incapable of sustaining a successful succession and brought Jobs back.  It is still a first generation company no matter how successful.  The company needs to build up new leadership that can take the reigns if the aging Jobs leaves on hiatus, health, or legal reasons.  Only then will this type of turmoil protect shareholders value and allow its customers to rest assured that their experiences have not been the corporate exception that makes the rule.

First, Apple has to avoid the legal cryptonite that they have brought on top of themselves by failing to follow the accounting mandates of the SEC.