Whose Fault is it Anyway?
General Business News
Whose Fault is it Anyway?
Enron has become a household word synonymous with treachery, deceit, and outright theft of the worst order. And its easy to blame the many and condemn an entire group the accounting industry as a whole rather than taking the time and care to find out exactly who was responsible, particularly when the guilty are all scrambling for cover.
We would like you to take a moment, step back from the hype and look at all of this through the only real filter you should use when passing judgment your own experience. There are a number of recent polls that reflect how badly the CPA profession has been harmed by the Enron debacle. And, no doubt, some of the repercussions will likely create legislation to prevent scenarios like Enron in the future. Our purpose here is not to debate the merits of the various proposals that will come from the myriad investigations going on in Congress and other regulatory bodies. It is to let you know that regardless of what happens, this firm and its personnel will never swerve from the path of excellence set for it by our profession.
There are more than 400,000 certified public accountants who are members of the American Institute of Certified Public Accountants. There are still more who are not members of the AICPA, but bear the title of CPA which was conferred on them by their respective governing state agencies. Why do you suppose these people have attained the title of Certified Public Accountant? Did they get it by simply paying an annual fee? Perhaps the fact that they passed a test, albeit a very difficult test, made them a CPA or was it something more?
Let us assure you it was something more. Thankfully, part of that something more is you, our clients. You are doctors, lawyers, teachers, government workers and from many other professions that make this country great. You need investment advice, audits, advice on accounting matters, income tax preparation and planning, computer consulting, business advice and a host of other services that we CPAs provide..
While accountants are generally a quiet lot, except when we run into Enron-like situations in our profession, we are extremely loyal to those whom we serve. Yes, we have become what we are because we want to serve. We want to serve the public and we want to serve our community. While loyalty may seem to be just good business sense, in our profession, it is more often a demonstration of plain human values.
There are a few other things that allow us to be Certified Public Accountants. In most states, we have stringent educational requirements, including 150 hours of college level courses (basically five years of academic training). After this, we are required to take the CPA exam (no easy feat). Even after we pass the that, we arent finished. We then have an experience requirement of one to two years service in the profession (depending on the state) before we are even eligible to be called a Certified Public Accountant. And further, we have to pass an ethics examination prior to being licensed (I guess those responsible at Enron forgot what they learned here).
And education doesnt stop at the issuance of our licenses. Did you know that the Securities Exchange Commission, the United States Government and our various licensing boards generally require a minimum of 20 hours of continuing education each year with a total of 120 hours to be obtained in a three year period, just to maintain our license?
You may ask, Isnt this a little much for just counting beans?" To be honest, wed have to answer yes, but we dont just count beans. We help you make decisions that directly affect the course of your life for many years to come. That is why you've hired us and trusted us for so many years.
Wouldnt it be a shame if someone in your industry was convicted of money laundering and the same was said of you simply because you were in the same industry? Just as with you and the vast majority of your colleagues, we CPAs are generally a hard working group of men and women whose sole aim is to get it right and help those we serve do likewise. How many times have you thought of telling us that we obviously work for the IRS? Truthfully, sometimes we feel like it ourselves when we have to argue with clients over the right way to do things.
We realize that a lot of people lost a great deal of money on the Enron fiasco and other recent highly publicized business failures. While we grieve for those folks, we also know that businesses fail. That is the nature of business some win and some lose. When the loss is due to a failed audit, the auditor should be held accountable for their failure, but its not always the auditors fault and, we hope, that will be taken into account in the legislative process.
So, getting to the question of who is to blame for the Enron debacle, we simply do not know for sure, but we will venture a guess. First, any senior manager, or manager in Enron who knew of the bad transactions is guilty, but we will not guarantee that we know everyone who fits that category. Second, anyone in the auditing firm who violated any civil, criminal or moral law or who violated professional standards should be held accountable. Third, our lawmakers and our regulators probably share some blame for their inability to properly regulate the accounting and reporting disclosures either due to a lack of funding or a lack of resolve. Fourth, to the extent the disclosure requirements and accounting rules did not provide enough information to investors and creditors, the accounting profession bears blame.
Finally, there is one culprit that too few people tend to look at greed. The only thing that keeps greed in check is a strong sense of right and wrong, or morality, and that is something very difficult, if not impossible to legislate.
In the midst of all this discussion of reform and who is guilty, lets not forget we have what is one of, if not the, best governments in the world. Much of the good in our society today, has come from the legislative reforms of yesterday. No doubt there will soon be a flood of proposals coming from Congress and we would urge you to voice your opinion as concerned citizens. The job incumbent upon you will be to determine if the legislation is worthy and effective, or if its simply window dressing. We recommend that you review the legislative proposals from both an emotional and a business perspective then tell your congressional representative what you think. Remember, when the final signature is affixed to a bill, you will be the ultimate source of revenue to enforce that legislation.
In the meantime, remember, there is a reason we serve you as your CPA and that reason has not changed from the very first day you met us. Were here to serve.
Have a great March!!
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.