Letters

Disappointed With JofA News
I have looked forward to the JofA news in the last few months because of the unprecedented events challenging our profession. Yet I see very little news or commentary in the magazine.

Isn’t it reasonable to expect the JofA to publish comments about the most important events in the history of our profession? Isn’t some news to be expected about the conviction of Andersen for obstruction of justice and the demise of a premier firm?

Is a brief quote by the president and CEO in the Highlights section all we can get in these difficult times? Is the most important item for News Digest a survey tracking the popularity of traditional office holiday parties?

In these times is the job of JofA “business as usual”? Does this mean I should have no concern about my unfunded pension?

C. Eugene Sturgeon, CPA
(retired)
Abingdon, Virginia

Profession Needs Monitoring and Control
“The Rise and Fall of Enron” (JofA, Apr.02, page 41) is an extremely well-written piece.

As a former auditor from a regional public accounting firm, I want to see CPAs regain the integrity they deserve and would like to share some of my own ideas on the future of public accounting.

During my 17 years as an auditing manager, I audited the entire gamut of companies—from the small closely held to the publicly traded. Two years ago I gave up public accounting for a controllership position because of the obvious problems that existed in my profession.

The main problem I perceived was a lack of independence throughout the entire audit process. How can independence truly exist if such a large percentage of workers in the accounting department being audited are former employees of the current auditors?

In my opinion, public companies should be required to change auditing firms every three to five years. I foresee bid processes similar to the government’s, with the firms’ qualifications and fees being the deciding factors. This, however, leads to the second major problem that made me leave the accounting profession.

The CPA needs to be adequately compensated for the tremendous job of conducting an independent audit. Price-cutting of audit fees is ridiculous. Some regulatory body needs to establish a price range for audits. We need to make the audit profitable for accounting firms so they can focus on that specific task and can stay in business without the pressure of having to drum up consulting work—the concept of which is under scrutiny right now.

Unfortunately, I believe that the independence and the pricing should be controlled and monitored by a regulatory body because the accounting firms have shown they could not do it themselves.

Rosemary Krus, CPA
Baltimore

Wrong Choice of Words?
I was very surprised (shocked might be a better word) by a comment that appeared in “A New Scorecard for Intellectual Property” (JofA, Apr.02, page 75). The article said that “CPAs must recognize when a purchase price allocation might raise questions from the SEC to ensure their clients are not surprised.” This concept is also repeated in the executive summary.

I hope the implication that the SEC makes the call on the propriety of the purchase price allocation was just an oversight or a bad choice of words. Clearly it is the job of the auditor to determine that purchase price allocations, as well as all other accounting matters, result in the financial statements’ being fairly stated. After all, the auditor is the one that expresses an opinion on the clients’ financial statements, not the commission.

Left uncorrected, this wording could be construed to mean that the CPA’s role is to advise the registrant as to what the SEC might let them get by with rather than determining that the registrant has properly accounted for the transaction. For that matter, the accounting should be no different whether the client is an SEC registrant or a private company.

I believe that clarification is appropriate to avoid giving non-CPAs the wrong impression.

Kenneth L. Cochran, CPA
Dallas

Author’s reply: The reference to the SEC in that particular sentence was not intended to imply or suggest that the commission, rather than auditors, expresses an opinion on the propriety of financial statements. Nor is there an implication anywhere in the article that CPAs advise registrants about “what they can get by with.” The next sentence states, “Unless companies can support their accounting decisions, regulators will question allocating the entire purchase price to goodwill rather than part of it to IP and other intangible assets.”

Accounting rules can apply to both public and private companies, and the use of an SEC registrant as an example was not meant to lessen the importance of following new accounting rules as a private company.

James Donohue, CPA
New York City

Letter on Target
I read with interest the letter “For National Licensing of CPAs” (JofA, Jun.02, page 11).

A foreigner—or as I am quaintly termed, a “resident alien”—I have just taken the Uniform CPA Examination. I sat for this exam in Colorado rather than my resident state of California because the licensing requirements are different. There were many others from California and a person from Massachusetts in the same position.

Quite frankly, it is a ridiculous situation for a supposedly national qualification. The letter writer is spot on in suggesting that state boards should be administrative only—with policy and licensing set nationally.

The letter’s second point about accounting standards also hits the mark. Other countries such as the United Kingdom and Australia issue subsequent amendments not by releasing an additional standard but by amending and reissuing the existing one (including using the same number). This way everything on a topic is together, and instead of 140 plus standards, you have far fewer.

Andrew Stokes, CA
(Australia)
San Rafael, California