The Current State Of The Accounting Profession

THE CURRENT STATE OF THE ACCOUNTING PROFESSION What Went Wrong? As the bubble economy encouraged corporate management to adopt increasingly creative accounting practices to deliver the kind ofpredictable and robust earnings and revenue growth demanded by investors, governance fell by the wayside. All too often, those whose mandate was to act as a gatekeeper were tempted by misguided compensationpolicies to forfeit their autonomy and independence. The technology stock bubble of the late 1990s – and the puncturing of that bubble in 2000 – coincided with significant failures in corporategovernance. Those, in turn, contributed to the accounting scandals and led to the loss of public confidence in the accounting profession. The catalyst for these events was a fierce battle by many managersand directors to meet investors’ expectations that the corporations in which they purchased stock would report a steady stream of high and ever-increasing quarterly profits and revenues. In thestruggle to deliver what their shareholders clamored for, management and directors, as well as the investment bankers, analysts, and lawyers working alongside them, lost sight of their responsibility topresent as full and fair a picture of the company’s financial position as possible. As market indexes like the Dow Jones Industrial Average and the Nasdaq Composite index rocketed to one new high afteranother, all too many independent auditors lost their autonomy and their judgment – and ended by blurring the line between right and wrong. It is true that the capitalist system requires lawyers andother consultants to serve the interests of their corporate clients as advocates. But that role in no way excuses their lapses; these professionals must shoulder their share of the blame for thefailures that many have too easily blamed entirely on the auditors. Accountants who serve as auditors of publicly traded companies have a different responsibility. Far from being advocates, auditors are...