Corporate Officers, Boards Are Accountable

Conrad Giedt’s assertion that practically all financial statements today are misleading is itself misleading [“CPAs Responsible for Enron Crisis,” Letters, Feb. 3].

In fact, most financial statements are reliable and give a true picture of the financial status of the companies that produce them. It may be true that, due to the increased sophistication and complexity of modern business, financial statements are more opaque than they should be. And there may in fact be instances in which that opacity is purposeful.

I also feel compelled to point out that whatever shenanigans may be going on in financial reporting, in most cases the primary culprits are corporate officers and their boards. Senior management and boards of directors are well aware and regularly acknowledge in writing that they have primary responsibility for the veracity of financial reports. Management and boards of directors make the final decisions about how their companies will ultimately be portrayed in financial reports, not auditors.

As for the auditors, their responsibility is also clear. Where they find wrongdoing or inaccuracy, their duty is to report it to management and demand corrections. If management won’t change the statements, the auditor must resign the engagement. Whenever this standard is breached, the auditor should be disciplined.

David George, CPA/PFS

Chairman, California

Society of CPAs

Irvine

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I found Mr. Giedt’s letter to be an interesting perspective on the Enron debacle. Like Mr. Giedt, I have also practiced in public and private accounting since the early 1970s. For many years, auditing has been a loss-leader for other services offered by public accounting firms. One can easily make the argument that artificially low fees lead to substandard work.

CPAs have been concerned about cost cutting for some time. Unfortunately, it takes the cooperation of all of the public accounting firms to ensure that this practice stops.

B.L. Wachs, CPA

Santa Ana