Accounting: It’s a Brave New World
One used to play professional soccer. Another wrote an eyewitness account of the fall of the Berlin Wall. A third got a big surprise when an inventory of “frozen” lobsters began scuttling away before he could count them.
Who are these madcap free spirits, these wild and crazy bohemians, these American fools? The cast of “Survivor”? The members of some High Sierras cult? Nope, they’re all ... accountants. As in “green eyeshade.” As in “No. 2 pencil preferred.” As in--dramatic pause--”Arthur Andersen.”
They’re living symbols of a profession changing so fast that even some lifelong members say they can barely recognize it. A profession once dominated by stern Anglo-Scotsmen who saw themselves as capitalism’s conscience but whose latter-day disciples are being publicly flogged as symbols of shoddy morality and ‘90s-style “corporate greed.” A profession whose recent fall from grace has bestowed a wealth of material on editorial cartoonists and talk-radio hosts but offers little cause for levity to its daily practitioners.
As David Albrecht can testify. A few days ago, a journalist phoned up the Ohio accounting professor to ask if he’d heard any good accounting jokes lately. You know, ha-ha, like the one President Bush told last week about Saddam Hussein finally agreeing to weapons inspections. “The bad news is that he wants Arthur Andersen to do it,” America’s mirthful Commander-in-Chief quipped.
Albrecht, who teaches at Bowling Green State University, was not amused. “There aren’t any jokes about accounting,” he told the reporter. “Accounting is serious business.”
Maybe. But that hasn’t silenced the ridicule and second-guessing that now surround Andersen, the venerable Chicago accounting firm that has emerged as a central player in the mushrooming Enron Corp. scandal. Once a model of pinstriped propriety, Andersen has admitted to shredding thousands of documents relating to its audit of Enron, the Houston-based energy company that collapsed in bankruptcy last December. Two weeks ago, in a carefully choreographed anticlimax, a tight-lipped former Andersen auditor, David B. Duncan, took the Fifth Amendment rather than discuss his alleged role in the debacle.
Accountants, in sum, seem in danger of blundering into that fiery abyss reserved for politicians, lawyers, doctors, journalists, cops, priests, pro athletes and other formerly revered occupations brought low. Some say that the profession has been wandering off-track ever since accounting mega-firms like Andersen, one of the so-called Big 5, began reaping big profits by offering clients sophisticated business advice instead of just honest bookkeeping.
“Maybe an analogy is to the religious scandals of a few years ago,” says Bill Cummings, an accounting professor at Northern Illinois University and past president of the American Accounting Assn.’s Midwest region. “Jim Bakker and Jimmy Swaggart were found [to be] raising all sorts of money on false pretenses. I don’t think the TV religions have ever recovered from that.”
To repeat the question: Who are these people long perceived as monastic pencil pushers with unfashionable eyewear and fluorescent tans? Whose holy text is a 4-inch-thick manual with the racy title “Generally Accepted Accounting Principles?” Whose professional roots date back to ancient Babylon and Greece, where the world’s earliest math whizzes carefully recorded tributary offerings to the gods? (“Let’s see, now, that’ll be 200 head of goat, 50 slaves and 500 drachma of olives, minus the dozen sacrificial virgins you guys still owe us.”)
More perplexing: How did a line of work synonymous with terminal dullness suddenly land a starring role on “Hardball With Chris Matthews”?
Trying to Shake
the Dull Image
If things don’t seem to add up in the field of accounting lately, maybe it’s because we’re finally seeing that the human calculators are a lot more human than we imagined. And their work is a lot more complicated and subtle than its humdrum image suggests. Even the California Society of CPAs concedes it’s been tough in the last decade to lure rising young stars away from dot.coms and investment banking. A recent article in its youth-oriented Quest magazine acknowledged the perception that the accounting biz is to heart-pounding adventure what the movie biz is to sincerity.
“What could be more unexciting than filling out IRS forms all day long,” the article asks in a sporting attempt at reverse-psychologizing, “or poring over a company’s books to make sure its debits and credits balance?” The article then ticks off a number of scintillating careers that began in accounting: An FBI agent who tracks down drug smugglers, an environmental consultant helping businesses meet governmental regulations, a financial advisor to movie stars and sports legends.
Since most of us equate accounting with February weekends spent poring over receipts and writing fat checks to Uncle Sam, we may prefer not to think about it much. But if we did, accountants say, we’d be surprised.
“I say I’m an accountant and I see peoples’ eyes glaze over. And yet my work is very interesting. It’s a little like being a detective,” says Susan Slater, vice president of finance for A Place Called Home, a South-Central L.A. charity. As evidence, Slater cites a few past assignments from her previous life, when she specialized in fraud- and litigation-related cases.
“I’ve gone into Mexico to count inventory in Spanish. I’ve taken inventories in food lockers--it’s very interesting what you see. I’ve counted pipes in dusty fields, counted cash on the midnight shift in casinos.”
Yes, her job is stressful and demanding, Slater says, especially during the current audit/tax season. “It’s almost like being a doctor without the emergency requirement,” she observes. “This is more of a grim slog all the time. And yet accountants usually love their profession. We’re good at it, and we like to think we have a good sense of humor, although others might not get the joke.”
Many of today’s accountants, it appears, are outgoing, highly educated people like Slater and Tony Teng, an affable 42-year-old formerly with Arthur Andersen who now teaches accounting information systems at Cal State Long Beach. Teng still gets a chuckle remembering the time he was sent to count lobsters in a seafood restaurant’s refrigerator. He thought the beasts were dead when he laid them out neatly on the kitchen floor for inspection--one, two, three. Then they started crawling away under the food preparation tables. Seems they’re weren’t stiffs, only temporarily stiffened.
“The stereotype of a boring accountant is what you see in the movies and what you see in the media,” Teng insists. “There are plenty of accountants that bungee jump or have exciting lives.”
More than tallying endless rows of numbers, accounts say, their trade demands iron-clad scruples, an independent mind-set and the ability to create order out of chaotic clumps of data. It requires holding clients’ hands when necessary and making them face up to reality when their pie-in-the-sky financial projections crash landed.
“People are very emotional about money,” says Slater. “So it’s a bit, I suppose, like being in the diplomatic corps. You have to go in and talk to a very upset person who knows he or she is being investigated and may or not be telling the truth. Sometimes the yelling is the most informative part.”
Adds Curt Olsen, a spokesman for the California Society of Certified Public Accountants: “One of the things we’re always trying to counteract is the image of the bean counter. The fact is, CPAs need to have high personal skills because they’re dealing with psychology.”
And with computers, you don’t even need to be that good at math anymore. “I have a lot of friends who are accountants, and we’re always trying to figure out who’s going to divide up the tab,” says Cindy Holdorff, a partner with the Sherman Oaks firm of White, Zuckerman, Warsavsky, Luna & Wolf.
Even Accountants
Have an Exciting Streak
Pop culture generally has viewed accountants in one of two ways: either as milquetoast Walter Mittys, like the Jack Lemmon character in Billy Wilder’s “The Apartment,” a human doormat who lets his bosses use his Manhattan digs for their extramarital trysts, or as smarmy but lovable con men like the Mob bookkeeper played by Charles Grodin in the 1988 film “Midnight Run.”
But with the explosion of white-collar crime in America, a third typology has emerged in the field of “actuarial science”: the nervy practitioners of “forensic accounting,” which one Canadian journal has pronounced the profession’s “sexiest branch.” Like bloodhounds in pursuit of quarry, forensic accountants sniff out missing-money trails and dig up fraud. Frequently drawn from the ranks of computer specialists and ex-cops, they ask tough questions, serve as expert witnesses and occasionally find themselves in the middle of international subterfuge. Since the Sept. 11 attacks, forensic accountants have been recruited to help track the money flow from underground terrorist cells in the United States and Europe back to their overseas sponsors.
From Bob Cratchit to James Bond, with a nod to Woodward and Bernstein, modern accounting has certainly come a long way. Yet some believe the business started losing its bearings precisely when it got, ah, sexy. Trustworthiness, not glamour or adrenaline rush, had always been accounting’s calling card. For decades the accountant’s green eyeshade was the equivalent of the neighborhood beat patrolman’s badge, the country doctor’s little black bag.
“An important and severe profession” was how one Victorian-era Scotsman approvingly described his vocation. Most 19th century number crunchers saw themselves as enlightened defenders of the free-market faith, a bulwark against entrepreneurial excess. “They were deeply religious people, almost all of them, and they almost felt it was like a calling from God to protect the public interest,” says professor Cummings.
The discipline’s moral tenets, in fact, had been carefully mapped out as early as 1494 by the Franciscan friar Luca Pacioli, in his seminal treatise, “Somma de Aritmetica, Geometria, Proportioni et Proportionalita (Everything About Arithmetic, Geometry and Proportion).” Professional accounting came relatively late to the United States, where there were only 300 CPAs in 1900. But after the 1929 stock market crash, the Securities and Exchange Commission tightened the screws on publicly held companies, forcing them to hire accountants to prove they were staying out of the red ink. Accountants earned widespread trust and respect with their civilized ethics code, including no splashy advertising or poaching each others’ clients.
So what happened? In a nutshell, starting in the late 1970s, the federal government began removing many competitive restraints on the industry, says Lynn Turner, former chief accountant of the Securities and Exchange Commission and now head of the Center for Quality Financial Reporting at Colorado State University. Rather than its old style, which was “very much like an English gentlemen’s club,” Turner says, the profession grew entrepreneurial and aggressive.
That change cut several ways. Spurning decades-old relationships, some Fortune 500 firms began playing the Big 5 accountants--Andersen, PricewaterhouseCoopers, Ernst & Young, KPMG and Deloitte & Touche--off each other, awarding their business to the lowest bidder. Yet auditing fees still soared, to an average of $9 million among blue-chip clients. So did insurance costs due to fraud-related lawsuits.
Eager to boost profits, big firms expanded their menu of “consulting” and “management advisory” services to clients. Top business schools began cranking out more computer specialists and financial planners than nuts-and-bolts mathematicians. Gradually, experts contend, the profession’s rigidly self-enforced codes of do’s and don’ts began to slip. Objectivity was compromised as big accounting firms began serving as corporate confidantes rather than overseers. Some believe those contradictions may lie at the heart of the Andersen-Enron troubles.
“The CPAs in the past, they weren’t trying to sell you a used car,” Turner says. “They were saying, ‘There’s the options you have, pick one, and I’m going to give you my unbiased viewpoint.’ It is very easy to lose that trust. It is extremely difficult to rebuild it.”
What comes next? Some predict full-scale federal government intervention and a slew of new regulations. Others say the industry must simply do a better job of policing itself. Who knows? Now that accountants are searching their hearts and baring their souls in public, professor Cummings thinks the profession at last could be ready for prime time. “You had ‘L.A. Law,’ and of course ‘The Practice,’” he says. “Now we need ‘Chicago CPAs.’ Maybe now the public would buy that.”
