Public Accounting, RIP

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Enron scandal may administer the coup de grace to the public accounting
profession. Already last rites are being said for Arthur Andersen,
one of the big five accounting firms. Andersen is under siege after
destroying crucial documents relating to the Enron audit

are two scenarios being banded about concerning the future of private
auditing firms. At one extreme, optimistic pundits refuse to believe
that Andersen is history. They predict that the firm can clean house,
restructure, change its name and survive. Also, partners at other
firms will realize that their bending of rules to pacify large clients
cannot continue. So public accounting will rise from the ashes like
the phoenix.

the other extreme being alluded to is what frightens me. Some are
saying that government will use this scandal as an excuse to assume
all auditing functions. Of course, it would be difficult for the
government to pass up an opportunity like this. They could seize
the moment and expand their power even further. We can only cross
our fingers and hope this doesn' t happen.

what would auditing be like if the Federal government performed
it? Bear in mind that the function would be administered, not by
elected officials but by entrenched bureaucrats who survive from
administration to administration. Today's bureaucrats operate under
the philosophy of political correctness and its three principles:
egalitarianism, diversity and multiculturalism. Temporarily assuming
the mindset of a Washington bureaucrat I can give you a preview
of some of the changes in auditing that might occur.

would contend that anyone who can pass a civil service test could
perform any audit function required. Therefore they would not hire
CPA u2018s and would claim that the CPA exam is biased in favor of those
who have studied accounting. But those with no accounting training
would be at a disadvantage so the egalitarian principle would be

the AICPA's Financial Accounting Standards Board would have to be
restructured. This Board has been comprised primarily of white males
and, since white males have a history of oppressing women and minorities,
the Board's pronouncements would be suspect. In addition, their
strict rules regarding accounting practices inhibit creativity,
which is necessary for people to achieve a feeling of psychological

Financial Accounting Standards Board would be restaffed with people
from diverse ethnic and cultural groups as well as those who have
been held back as result of a discriminatory society. The symbolism
of such a group is important enough to sacrifice correct accounting

some government auditors may not be fluent in English, companies
would be required to keep a separate set on books in Spanish and
maybe a third set in another language. In the future, when vision
impaired auditors are added to the staff, companies will have to
create a set of records utilizing braille.

this change will not be implemented immediately because of the unfavorable
publicity the government received as a result of its experiment
with blind nurses. The blind nurse who mistakenly assumed a visitor
was the patient and forced her onto a bedpan against her will caused
quite a controversy. But this was an isolated incident and shouldn't
be used to prohibit blind auditors.

government will probably not use a manager to supervise an audit
because this would imply that some auditors are better than others.
So each auditor would operate on his own, deciding for himself which
part of the audit he will perform. If two auditors choose the same
part, the matter will be referred to a government arbitration committee.
The audit will be postponed until the committee meets and makes
a decision.

must understand that some people are not good with numbers but that
shouldn't preclude them from being a government auditor. However,
they may not be able to balance a balance sheet and their inability
to do so would be stressful and lower their self-esteem. So the
newly staffed Financial Accounting Standards Board would replace
the traditional balance sheet with a new concept, the "Partially
Balanced Balance Sheet."

Statement of Income implies that an entrepreneur sold his products
for more than it cost him to produce them. This is malevolent capitalism
which the government hates. In fact, according to Washington, the
only positive thing corporations do is pay taxes. So the Financial
Accounting Standards Board would change the Statement of Income
to the "Statement of Provision for Future Taxes".

we come to the all-important Accountant's Report wherein the auditor
renders his opinion on the financial statements: do they fairly
represent the financial position of the company? But we are living
in a non-judgmental environment where all opinions have equal value
except for politically correct opinions which take precedence over
all others.

the Accountant's Report would read: "We have audited the accompanying
Partially Balanced Balance Sheet as well the Statement of Provision
for Future Taxes of XYZ Company for the year ended December 31,
2002. However, it would be politically incorrect for us to imply
that our opinion of these statements should be held in higher regard
than the opinion of others. Each reader of this report should, based
on their gender, ethnic affiliation and environmental circumstance,
form their own opinion regarding the financial position of XYZ Company."

21, 2002

Jarvis [send
him mail
] is a CPA living in
Beaufort, SC, an unreconstructed Southerner, and an advocate of
limited government.

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