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Auditing The Auditors

3/29/2018

In the early years of this century, a number of large public firms, including Enron and WorldCom, collapsed in spite of consistently receiving clean bills of health from their auditor, Arthur Andersen.

Andersen disappeared and the Public Company Accounting Oversight Board (PCAOB) was born.

Outgoing PCAOB chairman, James Doty, recently gave the remaining Big Four accounting firms, and others who audit public companies, even more power - and responsibility.

Beginning in 2019, auditors must do more than simply give a "pass or fail" opinion regarding whether their client's record keeping follows generally accepted accounting practices.

They must now also disclose "critical audit matters," which include confrontations they've had with management regarding the veracity of data provided.

Auditors help investors trust the numbers published by public companies. Unfortunately, investors don't hire the auditors.

As long as public firms are the auditors' clients, there will always be inherent conflicts of interest - and opinion - regarding financial reports.

Let's hope that the significant decline of accounting scandals in recent years indicates a heightened level of fiduciary responsibility by all parties.

Peter

How to Account for Happiness

3/22/2018

For more than six decades, the mountainous South Asian nation of Bhutan has followed a development policy inspired by the concept of Gross National Happiness (GNH).

Now, prime minister Tshering Tobgay wants to see whether fostering and measuring a higher level of happiness can help business as well.

As he wrote in the special report, The World in 2018:
"The idea is to make businesses simultaneously accountable to their shareholders, customers,
employees, the community and the environment."

While these goals are lofty, and laudable, the question for accountants is one of measurement. How to hold Bhutanese businesses, as the prime minister suggests, accountable?

The government has created a certification process which will collect data on "nine domains of Gross National Happiness," including employee well-being, community vitality and ecological diversity.

They have their work cut out for them. Hopefully the results will show an ever-increasing level of happiness, and perhaps even create a model for businesses worldwide to follow.

Peter

Nurturing Afghan Accountancy

3/15/2018

The important role played by accountants can often be undervalued in advanced economies.

But, in developing nations like Afghanistan, the accurate and honest recording and reporting of financial data is a revelation. More important, it is a critical foundational component for economic growth and prosperity.

Dried fruit and nuts seller in the old city bazaar of Kabul | Credit: Christophe Cerisier, iStock

As reported by The Economist, as recently as 2009, Kabul (a city of 4 million residents) had less than 20 accountants. And few of them were locals.

But, if this battle weary country is to grow its economy and improve its citizens' standard of living, an expanding population of accountants is critical.

As the Economist notes in its article:

          Boring old accountancy might not seem a priority for a war-torn country. But in business it
          can foster trust and transparency—scarce commodities in a country where corruption is
          systemic.

Given the often benighted situation in the country, how cool is it to read that 1,000 people have begun to qualify as accountants, and especially that a third of those are women.

Peter

A large marketplace abuts the polluted Kabul River in Afghanistan | Credit: Christophe Cerisier, iStock

What Value Transparency?

3/8/2018

Mostly I write about good stuff in this blog posts. But occasionally about things that rile.

When writing, I can look out over beautiful lake Geneva and see in the distance the flight path to the international airport. With the United Nations and myriad other large organizations in this Swiss town, there are plenty of airplanes coming and going.

Unfortunately, some of those planes are less welcome than others.

According to the Organized Crime and Corruption Reporting Project, Paul Biya, President For Life of Cameroon, has spent more than 5 of his 35 years in office out of his country.

Much of that time has been spent in Geneva with a large entourage, visiting a favorite five-star hotel. The OCCRP estimates his hotel bills alone add up to $65 million. The flights, $182 million.

A quarter of Cameroon’s population earns less than $2 per day. Need I say more?

And what has all this to do with a Color Accounting blog, you may ask? In a word: transparency.

Imagine if all the world could demand, read and understand the numbers that explain their living conditions, their businesses and their government.

Transparency is a good that makes the world a better place for all. Except, that is, despots.

Peter

Do they know how their President sleeps? Baka Pygmy Village, Dja National Park, Cameroon

In Praise of Obsession

3/2/2018

In the nearly 20 years we’ve been working on better explaining financial statements, I have to admit, I’ve had my moments of doubt.

Does it make any sense to spend two decades trying to improve the design of just one 8-hour workshop? Isn't perfect the enemy of good?

Not vertical! Click here to see the animated gif.

Will anyone actually learn better if we define a concept using this word or that? Who will really notice if I set up the room with the flip chart to the left of the whiteboard instead of the right?

Just when I was feeling a bout of doubt coming on, I read Brad Ellis’s article on the design of the corners of the iPhone X.

I gazed at the moving diagram that was switching between the shape of a theoretical rounded corner and the shape of the actual iPhone corner.

At first I couldn’t see any difference. But slowly I noticed a slight variation in shapes that the toggling gif was revealing. And as I kept looking, the disparity became more and more apparent. Eventually it loomed large.

In pursuit of excellence, detail isn't detail at all.

Channeling the obsession of the world's most valuable company, I know there are learners out there who will have their lightbulb learning moment, precisely because we set the classroom up just right.

Here's to your obsessions.

Peter

Photo by Gabriel Barletta on Unsplash

Auditing The Auditors

How to Account for Happiness

Nurturing Afghan Accountancy

What Value Transparency?

In Praise of Obsession

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Auditing The Auditors

How to Account for Happiness

Nurturing Afghan Accountancy

What Value Transparency?

In Praise of Obsession

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Author

Archives

Categories

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