Letters

"COSO's New Fraud Study: What It Means for CPAs" (JofA, May99, pages 1213) provides an excellent illustration of how important it is for the auditor to understand the risk present in a company. The study focused on frauds from 1987 to 1997. Who knows what auditors will face in auditing companies operating in the fast-paced world of e-business? Will there be even greater risk involved with audits of those companies who choose not to operate in that milieu?

In some ways the auditor's job is easier once it is clear the client has hit hard times. More intensive auditing is almost automatic in such situations. But can we relax when a company is doing especially well? Of course not, particularly as we audit fast-paced information-age companies—the change from good times to bad can happen almost overnight.

The author of a recent Harvard Business Review article presents a tool intended for company managers who, especially in good times, may not be as alert as they should be to organizational weaknesses. In "How Risky Is Your Company?" (HBR, May-June 1999, pages 8594), Robert Simon introduced a "risk exposure calculator" to measure how much internal risk is mounting in a company. The calculator is not an "appliance" but a model used to help managers visualize and quantify "pressure points" that could signal impending danger.

The premises upon which the risk exposure calculator is based could also benefit auditors who seek to understand the risks present in a client's business situation.

High-risk scores should alert company managers to make appropriate organizational adjustments. For the auditor, such scores should result in intense consideration of whether problems already exist that have influenced the financial statements.

John P. McAIlister, CPA, PhD
Chair and Professor of Accounting
Michael J. Coles College of Business
Kennesaw State University
Metro-Atlanta, Georgia

As an accounting educator, I am concerned that accounting programs all over the country no longer attract the brightest students. The future prestige and societal standing of the accounting profession will depend directly on the quality of its future members.

I was deeply disturbed, therefore, when I read this item in "The Eight Universal Laws of Leadership" (JofA, June 99, page 8): "Put duty before self. You have a responsibility to your mission and your staff. Sometimes one comes before the other, but both always come before your personal interests or well-being."

The author is entitled to his opinion. What disturbs me is that the JofA chose to publish his comments. That makes it harder for those who are trying to steer the best young people toward the accounting profession.

Today, such opinions would not attract gifted and talented young people to our profession since they have numerous other very attractive alternatives.

Nobody should be expected to put the mission and/or staff above personal interests or well-being. It is not only against common sense, but it is also terrible advice. Self-interest motivates us to advance professionally, sometimes to the extent of changing our organizational affiliation. Our well-being is inseparable from the well-being of our family and loved ones, and we must take care of it in order to be good spouses, parents, family members, friends and professionals.

Young people today have a different outlook about their careers compared to their parents and grandparents. What they value is the quality of life. Careers that enable them to live a life that is professionally challenging, yet personally fulfilling and satisfying, attract them. Since our university is not too far from Silicon Valley, I have observed that high-tech companies understand this and have done an admirable job of offering to the brightest careers that combine personal and professional fulfillment.

JofA readers, many of whom are students, should not get the impression that accounting career requirements and personal interests or well-being have to be mutually exclusive.

M. Zafar Iqbal, CPA, PhD
Professor of Accounting
California Polytechnic State University
San Luis Obispo, California

On behalf of the sole practitioner CPA and the smaller client, I would like to comment on the JofA articles about the consideration being given to standards overload. Since I operated my own firm for many years and dealt with a number of small business clients, I feel I have some perspective in this area.

This is not a commentary proposing the acceptance of "big GAAP" and "little GAAP," but rather one dealing with meeting the needs of the client. After all, the client is a CPA's reason for being in business.

Sometimes, while reading some of the technical incantations, I feel we are forgetting about that client who is now in his eighties and continues to operate a small hardware store. He is still in business because his customers depend on him for that "thingamajig" or "doohickey" they need to make a necessary repair and because it is what he has done all of his adult life.

That client needs annual financial statements primarily because his bank requires them in order to continue financing his inventory. This is why he chooses a CPA—he couldn't care less about the technicalities considered so vital to reporting. All he wants to know is whether he is making money and if he can continue to compete against the "superstore" at the new mall.

CPAs do their clients a disservice when they force them to bear the cost of what I call "accounting for nits."

In our quest for technical expertise, we have, to some degree, backed ourselves into a corner so that our product is not very meaningful to a number of people. We may have painted ourselves into this proverbial corner as well. For instance, if we find ourselves party to a legal action and an attorney asks, "Did you comply with the provisions of Standard no. 3,753 dealing with the accounting for nits?" we are at a great disadvantage when we can't recall what the standard on nits is.

We need to get back to the basics and quit popping aspirin and doing back flips over whether some government agency may regulate the accounting profession. We need to meet our clients' needs, and this includes producing statements that are both understandable and affordable.

Letters to the Editor

The JofA encourages readers to write letters on important professional issues in addition to comments on published articles. Because space is limited, letters submitted for publication should be no longer than 500 words. Please include telephone and fax numbers.

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