Thursday, March 29, 2012
"Did You Hear The One About...?"
When I began covering the accounting profession many years ago, a veteran practitioner who obviously availed himself of the open bar for about two Manhattans too long, shared this water cooler joke about the speed in which accountants willingly adapt to change.
“Glaciers could give accountants a 20-yard head start and still win in a 40-yard dash.”
Ba-dump-pa.
He tried to tell another, but I assured him I got the point.
But like it or not, every so often the profession gets hit with a game changer, and adapting no longer becomes a choice. Some move the profession along despite itself, like in the early 80s when PCs were unveiled and changed how the back office operated and others were borne out of a shocking necessity like Sarbanes-Oxley in 2002 or Dodd-Frank in 2010.
Lately however there have been a number of game-changers that may prove to reshape the accounting landscape. One certainly is ObamaCare and we’ll have to wait until the Supreme Court renders its decision later this summer.
Another is International Financial Reporting Standards. But the politics between FASB and the IASB, coupled with the one foot in the water and one foot out ambivalence on the issue by the SEC, promises to protract this already 10-year-old issue until it’s eligible for Medicare.
But one that has gained traction, particularly in Europe and now has the potential to come stateside is mandatory auditor rotation. Not that it’s a particularly new subject, in fact the Cohen Commission Report questioned the question of auditor independence versus performing consulting services for that same audit client back in 1978.
As you read this, lawmakers are grilling the chairman of the Public Company Accounting Oversight Board about the audit overseers concept release issued in 2011 which addressed auditor independence, professional skepticism, and objectivity, and, oh yes, asked stakeholders to consider mandatory audit rotation.
There’s been as you can imagine, a “lively” debate that has ensued on both sides of the issue. Proponents of the measure pointed out that some companies have retained the same auditors for nearly a century and that the audit engagements had morphed into what can be described as a long-term annuity for CPA firms. Others demanded that the PCOAB conduct a cost-benefit analysis and pointed out that you can’t effectively legislate ethics, no matter how many rules and regulations come out of a congressional subcommittee.
Whatever.
It will be interesting if auditor independence eventually disappears or it gets enough momentum to become the next water cooler conversation or one-liner at CPA firms.
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