Public Accounting, RIP

The 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

There 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.

However, 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.

But 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.

Bureaucrats 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 violated.

Also, 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 self-worth.

The 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 standards.

Because 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.

However, 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.

The 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.

We 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."

A 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".

Finally 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.

So 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."

January 21, 2002