From:
You are absolutely right. Because people assume that accounting can be done by a machine, they think they don’t need an accountant. Perhaps such people should be equipped with an electronic scalpel and they can do their own brain surgery!
As for the role of accounting in civilization, I used to think what you think but I am not so sure anymore. My confidence was shattered by the Rothschilds as I explained in a previous email but at least as much as an essay I found on Bob’s website which suggested that accounting is suffused with an ideological taint.
Leaving that aside I believe that accounting is a truth telling mechanism and accountants are truth tellers. If they are not that, they are nothing but petty fraudsters. For many years I have believed that tax is the snake in the garden. It has caused accountants to see the State as the enemy, to be rorted by all sorts of chicanery and legal trickery. It is not because I believe Ayn Rand that I would dispense with tax, it is because I think it has profoundly corrupted the mindset of the accountant (and the lawyers for that matter).
From:
Well stated. It is amazing that the circumstances here are so similar to what you describe. Another key factor that you did not really cover is technology, viz., do-it-yourself software such as Quickbooks. The software itself is okay, but its results are often illusory, as improperly trained accountants and others punch in numbers and data, but do not really understand the accounting process, at least as professional accountants know it. Couple that with the trends in the decline of behavioral standards that you cite, and the commercial relationships that we came to expect in developed nations, e.g., based on such attributes as trust and reliability, disintegrate -- rapidly.
It is no coincidence that advance of civilization goes in tandem with advances in accountancy, not only with the ability to measure, but also with behavioral aspects. The accountancy profession, with its institutional momentum, is incapable of turning the tide, by itself, IMO. We need a reformation, a renaissance, or the like to reverse the downward trend. Where will it come from?
Paul
_____________________________
Paul Bjorklund, CPA
Bjorklund Consulting, Ltd.
Flagstaff, Arizona
I am about to give expert evidence in a civil matter in respect to the failure or otherwise of a company to maintain proper records. In this particular matter the accountant, or accountants to be more precise, cobbled together a final set of financial statements that were wholly self-serving for the directors of the company. This entailed significant convolution and, I would say, corruption of accounting. This has been done shamelessly and I think that applies literally. The accountant, I surmise, doesn’t know that accounting is not to be manipulated for self serving ends. The lawyer is searching the (English speaking) globe for precedent. This is proving difficult.
Simultaneously I am involved in another matter, criminal in nature, about which I am legally constrained from giving detail. However I think I can say that the case has a disturbing element to it. Four insolvency practitioners and three government agencies have raked over the embers of this particular fiasco all the while bemoaning the lack of records. I became involved and asked if there were any general ledgers. There were. They had existed all the time and were set out in complete detail yet no-one bothered to look at them!
In a third matter I am the liquidator of a company to which a bank had appointed a receiver months before. The receiver is a chartered accountant of good reputation. When I asked for the accounting records initially the receiver and his lawyer attempted to block me. After a good deal of battering with the legal powers that fall to me I was provided with the records and a confession that reconciliations had not been prepared nor a general ledger from the time of appointment. The receiver’s lawyer’s argument was that it was ‘convention’ to fail to maintain proper records. I did point out that it is impossible to control receivables, for instance, without a proper records including a GL but that is what they attempted to do. The burden of fixing the records falls to me and what a profound mess it is, involving bizarre goings on with respect to GST (the NZ name for value added tax).
I am see many such instances as these.
I said to the lawyer in the first matter, partially in jest, that I seemed to be the only person in insolvency that cared about accounting records. He replied, in all seriousness, that was probably true. I have thought about that since and I fear he is correct. I have begun to have a fear that I am truly alone, a voice crying into a void. Something, seen from my perspective, is very badly broken.
Given that I am right I think about the causes. Leaving aside the general lawlessness that prevails amongst accountants due to their adversarial stance to the State’s tax collectors, I believe there are two causes: the manner in which accountants are trained and the fragmentation of accounting due to standard setting.
NZ follows an American model in which people who are to become accountants are ‘educated’ in Universities. There is minimal emphasis on double entry. Most of the courses are dedicated to theory, bullshit sociology, complex management accounting, auditing and so on. None of this makes any sense to a student if they first do not know the basics of accounting and that can only be gained by actually practicing the discipline. Large numbers of accountants, to use the term loosely, are produced who do not understand that the centrality of accounting is double-entry and the prime record is the general ledger. In NZ accountants insist on calling themselves ‘chartered accountants and business advisers’ as they are ashamed on being accountants alone. This disease began about the same time as the Cogitor travesty was perpetrated.
What has happened with standards, whilst well intentioned (the road to hell probably), has resulted in fragmentation of a discipline that should be approached holistically. As the complexity grows inexorably, practitioners are being left behind. Indeed the current chairman of the government body which approves standards has spent 20 years trying to ensure that standards only apply to big government and big business. He wants to exclude SMEs, being closely held companies, from the scope altogether. I understand why he wants to do this, but he suffers from an ahistorical perspective. When limited liability was developed in Britain, from where we get our basic law, the notion of ‘true & fair’ was developed to ensure creditors were protected. T&F has been found, in judicial precedent, to equate to standards. Yet 150 years later we seek to sever the connection.
Standards are replete with vast tracts of turgid wording much of it petty in the extreme. It is unrelated to the basic mechanisms of accounting. It is a feat of learning and memory to cover the whole scope. Practitioners dealing with small companies have long since abandoned the attempt to acquire the knowledge. Even those operating large, publicly accountable entities do not attempt to master it. In consequence accounting has no fulcrum upon which it pivots. There is no centre. It has become fragmented.
Words are no substitute for numbers. Having spent 20 years attempting to put standards at the centre I have had a Pauline style conversion. I now believe that all that is necessary is a set of principles – the conceptual framework will do for this purpose. It should then be left to the accountant to express these principles in the mechanics of accounting. Standard setters should be reduced to providing arithmetic examples, at a high level, detailing how this should be done. That is the reason why I prefer FASB to IASB. At least FASB works out how economic events operate arithmetically before it writes its turgid, prolix nonsense. But even then it does not show how its schemes work in double entry. I recall many years ago working with FAS 90 (I think) in regard to acquired mortgages. There are examples but not expressed in double entry. They are of limited use thereby.
In America the problem is compounded due to the fact that the most important issue in accounting, solvency determination, is left entirely to lawyers and courts. The disintegration is complete. I truly believe I am staring at something too awful to contemplate. Accounting created, or helped to create, the modern economic world. Yet in its time of crisis it is hopelessly ill-equipped to respond because it has so profoundly lost its way.
These may be the delusions of a solitary raving lunatic simply reflecting the psychology of the aging – being the prospect of doom. But then I might be right.