Thursday, October 27, 2005

Bart Schultz wins 2004 Barzun Prize

The American Philosophical Society has awarded Mr. Bart Schultz the 2004 Jacques Barzun Prize in Cultural History for his book Henry Sidgwick—The Eye of the Universe: An Intellectual Biography (Cambridge University Press, 2004).

Barzun Prize Recipients 1993–2004

Wednesday, October 26, 2005

Regaining Trust, by Don Kirk

From Journal of Accountancy (October 2005):

In 1978 Jacques Barzun, then a University Professor Emeritus at Columbia University, wrote an article entitled “The Professions Under Siege” (excerpted in the March 1984 JofA). Barzun’s clarion call was for the leadership needed to restore professions, including our own, to a respected place in our society. In 1980 William R. Gregory, then chairman of the AICPA, warned that competitive pressures in the profession “have created in some CPAs attitudes that are intensely commercial and nearly devoid of the high-principled conduct that we have come to expect of a true professional.” Both men’s writings were often quoted but seldom seriously considered. Much of what they feared has happened.

By the time of Barzun’s writing, the AICPA had lost its responsibility for the establishment of accounting standards to the independent Financial Accounting Standards Board and was, in response to congressional criticism, in the process of establishing a governance structure—the SEC practice section and the Public Oversight Board—for carrying out and overseeing peer reviews. That governance structure has since been swept away in a wave of accounting frauds, audit failures and governmental reforms. The crowning blow was the loss of the profession’s responsibility for establishing generally accepted auditing standards for publicly owned companies.

The lessons we learned from these experiences, it is hoped, will lessen the chances of repeating missteps because, without a doubt, our profession will remain under siege.

In my 45 years of association with the profession I have had several vantage points from which to influence or observe professional behavior. What disappointed me most were professionals convincing themselves that doing anything other than what was specifically prohibited was fair game because our professional objectivity and integrity were enough to protect the public and prevent jeopardizing our professional reputation. The resulting rationalizations led to attempts to downplay or dismiss the long-held notion that appearances should be considered in assessing independence; they led to flirtation with public ownership of firms; and they led to the belief that practically no service—even the aggressive marketing of what have proven to be abusive tax shelters—would call into question the objectivity and integrity of the profession. Cap all that with the years of effort to minimize the profession’s responsibility for the detection of fraud, and you have some of the reasons why regaining trust will take a gigantic effort of, in Barzun’s words, “moral and intellectual leadership.”

So, what should be done? For those activities and practices still in the control of the profession, let’s act on Barzun’s advice: Let’s never forget that our franchise is “a privilege given in exchange for a public benefit.” Let’s have the will to police ourselves in an open and transparent way “with no fraternal hand, with no thought of public relations.” Let’s instill in our members, member firms and professional associations the conviction that “ethical behavior is desirable, widely practiced, approved, and admired.” Let’s remember that we are licensed to use our accounting and auditing skills for the public good and that our code of ethics calls for us to do that with objectivity, independence and integrity. Let’s keep reminding ourselves that audited financial statements are for the benefit of shareholders and that services performed for audit clients that are not closely related to the audit or our accounting and auditing skills will call into question the objectivity of the auditor. Believe me, appearances do matter, especially now in the effort to regain public trust.

Don Kirk, CPA, is a former chairman of the Financial Accounting Standards Board and has been a partner of Price Waterhouse, a professor at the Columbia University Graduate School of Business, vice-chairman of the Public Oversight Board and a corporate director and audit committee chair. He is a member of the Accounting Hall of Fame at The Ohio State University and a recipient of the AICPA’s Gold Medal for Distinguished Service.