This post is my personal response to the article “In the Public Interest” by Harvey Kapnick taken from Accounting and Financial Reporting published by Arther Anderson, Chicago 1974.
Who else, but Kapnick can we look at today and say, "Now there's a guy who had it right!" Reading this article makes it so much more depressing to live in a world where Arther Anderson no longer exists. Knowing that Kapnick was forced to step down due to his opposition to Anderson's expanding role as consultants makes me beyond depressed. I shouldn't linger here, because I know moments before his death, Kapnick was validated.
I am impressed with his vision, his outrage and the level of compassion he brought to his view of the profession. When he speaks of a global economy, he is careful to state that all people in this economy should be represented fairly. He admits that a full time, compensated standards setting board is important, but remembers that practitioners should have an active role and encourages a place in standard setting for academics. This vision would have provided the profession with a level of effectiveness and respect that we sadly lack.
Further, I am impressed with Kapnick's lament over the decreased position of the balance sheet. This common sense approach to financial reporting is lost today. We have built an elaborate system of valuation that hides the information we are supposed to be presenting in order to maximize profit on paper. Warren Buffet made his billions with a balance sheet approach to investing and has stated again and again that this is the only way to really know where to invest. In fact, Buffet's wild success would not have been possible if not for the fact that the rest of the investing world was focused on the other, dysfunctional approach.
Now I just have to find out how to live out Kapnick's approach.
Friday, April 3, 2009
Response to "How the U.S. Accounting Profession Got Where It Is Today" Parts I and II
This post is my personal response to the article "How the U.S. Accounting Profession Got Where It Is Today" by Stephen A. Zeff taken from Accounting Horizons Vol. 17, No. 3 published September 2003.
A graph was being built in my head as I read this piece. The x axis represents time from 1896 (the establishment of the accounting profession in America) to the present. The y axis represents respect gained or lost by the profession at major moments. At least in the opinion of Zeff, this graph seams to raise with a great deal of speed through the 1950s, then quickly fall as infighting and profiteering take over the profession.
Taking Zeff's word as gospel, I'm left feeling anger at the forces that took accounting away from the reputation early American Accountants struggled to build. The industry's reputation and the level of respect it was once given was built through being a detatched third party spanning the gap between absentee owners and management. Zeff's use of Mark Steven's description of the profession as "well paid (but not wealthy) partners in collegial practices that stressed causion, prudence and a disdain for the trappings of commercial business" had a profound impact on my view of the reading. If I were asked to invent the profession anew, ignoring history with a focus only on what should be, I couldn't think of a better place to start than that phrase.
It is easy for me to imagine cocaine fulled secret meetings held by guys in Maimi Vice suits, plotting to hand the control of financial reporting standards over to the highest bidder. This seems too easy an explanation. I think of my own aspirations and realize they closely mirror the path taken by the Big X accounting firms. I see myself as poised to help small businesses with their accounting, and use my knowledge of business to help them in other areas. Why should I then feel wronged by the industry for following the same path?
Auditors were more qualified than any other group of business people to aid their clients in the transition to the modern age of business. Who else knew so much about business processes? Who else would be able to assist firms in accounting for new, conglomorated firms? The move toward consulting services then seems organic. This isn't to say that it remains, or ever was right.
The movement away from serious thought being put into accounting standards by the large accounting firms was a depressing passage to read. The discourse provided by Big 8 produced journals and other public statements are exactly the kind of thing a profession needs to be dynamic and vital. The vital role of collaboration and the danger of competition in a profession is played out through the fall of this open communication. A profession should promote innovation and skill over bottom line profit.
A graph was being built in my head as I read this piece. The x axis represents time from 1896 (the establishment of the accounting profession in America) to the present. The y axis represents respect gained or lost by the profession at major moments. At least in the opinion of Zeff, this graph seams to raise with a great deal of speed through the 1950s, then quickly fall as infighting and profiteering take over the profession.
Taking Zeff's word as gospel, I'm left feeling anger at the forces that took accounting away from the reputation early American Accountants struggled to build. The industry's reputation and the level of respect it was once given was built through being a detatched third party spanning the gap between absentee owners and management. Zeff's use of Mark Steven's description of the profession as "well paid (but not wealthy) partners in collegial practices that stressed causion, prudence and a disdain for the trappings of commercial business" had a profound impact on my view of the reading. If I were asked to invent the profession anew, ignoring history with a focus only on what should be, I couldn't think of a better place to start than that phrase.
It is easy for me to imagine cocaine fulled secret meetings held by guys in Maimi Vice suits, plotting to hand the control of financial reporting standards over to the highest bidder. This seems too easy an explanation. I think of my own aspirations and realize they closely mirror the path taken by the Big X accounting firms. I see myself as poised to help small businesses with their accounting, and use my knowledge of business to help them in other areas. Why should I then feel wronged by the industry for following the same path?
Auditors were more qualified than any other group of business people to aid their clients in the transition to the modern age of business. Who else knew so much about business processes? Who else would be able to assist firms in accounting for new, conglomorated firms? The move toward consulting services then seems organic. This isn't to say that it remains, or ever was right.
The movement away from serious thought being put into accounting standards by the large accounting firms was a depressing passage to read. The discourse provided by Big 8 produced journals and other public statements are exactly the kind of thing a profession needs to be dynamic and vital. The vital role of collaboration and the danger of competition in a profession is played out through the fall of this open communication. A profession should promote innovation and skill over bottom line profit.
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