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Online Issues > May 2003 > Letters
Letters Regaining Public Trust Our First Priority Has it not learned anything from the recent problems with the Enrons of the world, caused, at least in part, by accounting firms focusing on the marketing of other services? As a profession, we CPAs have a credibility problem about where our loyalties lie. It is all too obvious the public has lost confidence in our ability to provide reliable attest services. Is it not time to devote 100% of our efforts to reestablishing our priorities and their trust? Let’s forget the marketing of nonaudit services until we can clearly demonstrate an ability to consistently and reliably provide the core services that brought the CPA profession to prominence. Those who rely on our opinions need to believe the accounting profession is focused on regaining their trust in our ability to provide an opinion through an audit that is truly objective and free of even the appearance that we lack independence. F. G. Haugh, CPA Corporate Culture and Ethical Behavior Every company I have consulted with has both an espoused culture and a real culture that people live by every day. Real culture is closely linked to the behaviors people are actually rewarded and punished for, primarily through promotion, compensation and bonus mechanisms. Real corporate culture for adults is similar to peer pressure for teens, making it difficult to behave outside the group norm. Companies need to be aware of any differences between espoused and real cultures, particularly with regard to ethical behavior. For example, if sales personnel who aggressively book revenue are consistently rewarded while those who take a more conservative approach are left behind, one may expect to find problems in the company’s revenue classifications and related financial figures. On the other hand, a company such as Texas Instruments, cited in the article for its ethics leadership, may well have used the same pressure of real corporate culture to act as a consistent “invisible hand” that enforces appropriate behavior. The assessment of real culture therefore is an important ingredient in any examination of a company’s adherence to its espoused code of ethics. George P. Jones, CPA Another Resource for Ethics Programs It also mentioned a New York Stock Exchange proposal that would require all companies traded on that exchange to adopt corporate guidelines and a code of business conduct and ethics for all employees. If the SEC approves this proposal, it will mean that many publicly traded companies will be searching for guidance in developing codes of ethical conduct for their employees. CPAs may provide assistance to their corporate clients in the development of codes of conduct for employees involved in financial management. While the article identified several organizations that can help accountants charged with developing, implementing or monitoring a corporation’s code of ethics, it did not discuss the Institute of Management Accountants. The IMA has offered the opportunity for any financial professional to contact its ethics hot line toll-free at 800-638-4427, extension 1662, or to send inquiries via e-mail to its professional ethics counseling service at ethics@imanet.org. In addition, the IMA permits corporations to use its standards of ethical conduct for compliance with section 404 of Sarbanes-Oxley. Speaking as a longtime professor of management accounting who has integrated ethics education into the classroom, I can wholeheartedly endorse the IMA’s 20-year-old code of ethics. The one-page code is simple and yet provides ample guidance at no charge for proper ethical conduct for persons engaged in management accounting and financial management. It is the IMA’s desire to provide a service to the betterment of the financial community, as the AICPA and the Financial Executives International organizations do. Roland L. Madison, CPA In Favor of Electronic Filing Paper filing requires me to release control of the prepared return into several hands. Someone needs to make sure all proper forms are included in the right order, signed in the correct place and with proper supporting documents attached—this, by itself, is quite a process. Next the return must be put into an envelope with the proper address and postage, placed in a mail box or picked up by a postal carrier by April 15. What happens next entails a series of postal exchanges and movement by various modes until the return reaches its appointed destination, usually within three business days. Once the IRS receives it, the return is sorted, keyed into the computer, rekeyed for accuracy, passed through a validation process, approved, scanned for long-term storage and then supposedly shredded. Now, let’s compare this with the electronic process: I have a completed return, select “process return for electronic filing” and the software checks the return for any items such as invalid characters or missing fields that do not pass a set of criteria for electronic filing. Once approved, the return is electronically submitted and I get an “electronic receipt” from the processing center that the return has been received, followed shortly by an approval or rejection notice. On the surface, the two methods appear to achieve the same result, although, in using the electronic method there is much less hassle. With e-filing we also have confidence the correct numbers have been entered into the IRS computer (a large number of audits or IRS letters are generated by miskeyed returns). Add to this the ability to streamline the refund process and the acknowledgement of receipt, and the benefits of e-filing are numerous. Given these two options, I have no problem looking my clients in the eye and telling them e-filing is simpler and cheaper. I also would prefer to give them an electronic copy of their return: A CD with seven years of returns on it is more useful than a stack of papers. I believe paper returns have gone the way of the green bar reports, and frankly, I’m glad. Doug Ellis, CPA, CITP Accounting History Relevant to the Present? For example, in 1959, the AICPA created the Accounting Principles Board (APB). Its major objective was to issue official pronouncements, called opinions, on accounting principles. These opinions represented part of the development of financial reporting standards—generally accepted accounting principles (GAAP). One of the opinions that still exists today is APB Opinion 12, Omnibus Opinion, issued in December 1967. Paragraphs 9 and 10 dealing with capital changes have gone unchanged. Accordingly, there is no requirement for a statement of retained earnings in GAAP-based financial statements. However, disclosure of the changes in the separate accounts constituting stockholders’ equity (in addition to retained earnings) and in the number of shares of equity securities during the reporting is required in the financial statements. A statement of stockholders’ equity is the best way to satisfy this requirement, and today most corporations present changes in retained earnings in this manner. While some accountants profess that a statement of retained earnings is one of the required basic financial statements, the history lesson from 1967 provides evidence to the contrary. In this case, the past indeed has relevance to the present. Andrew D. Sharp, CPA E-Mail Blues Every day I receive at least 75 e-mail messages, most with large files attached. If the process to read, review the attachment and decide what action to take required five minutes for each message, e-mail management would consume more than six hours of my workday. My job is not to process e-mails but to help run a business. E-mail is a destructive technology that manages people instead of a technology that helps people to better manage. Edward J. Kmiec, CPA
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