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Bloomberg Columnist Hits a Nerve with CPA Audience
By Melissa Hoffmann Lajara
Posted on 8/13/09
NEW YORK -- Is it true that the public doesn’t trust CPAs? And is the CPA profession too easy to get into?
Bloomberg columnist Jonathan Weil made those claims in a recent speech before an audience of CPAs, saying that the accounting profession “is the easiest, from an educational standpoint, to get into.”
NYSSCPA President David J. Moynihan disagrees, and in a response to Weil, the keynote speaker at FAE’s July 30 Ethics Conference, he not only spoke to the ethical responsibilities of CPAs and the profession’s dedication to the public trust, but also explained why entry into the profession should be considered a celebratory milestone, comparable to the birth of a child.
“How many people in this room remember the day they passed the CPA exam?” Moynihan asked the conference crowd during his luncheon speech. Most in the audience raised their hands. “Why do you remember that? Because I just heard candidly—and I nearly bit my lower lip off—that our profession is very easy to get into. … You remember because you became something special that day. You were something different. You were not the same person you were the day before.”
Is It Too Easy to Become a CPA?
Weil's comments irked some in the audience, who could be heard grumbling about years of accounting “slave labor” and the notoriously difficult CPA exam as evidence to the contrary.
But Weil said that compared to other professions, CPAs have it easy.
“The notion that someone could get a professional license with only maybe a year of post-graduate school strikes me as very strange, particularly when you look at the training that medical doctors go through,” he said. “Even though the MBA program is not a professional licensing program, it seems to have more rigor than the requirements for getting a CPA.”
But Moynihan, a second-generation CPA, disagreed in his speech, which served almost as a counterpoint to Weil’s address, even though the two sessions were hours apart.
“I never thought this profession was that easy to get into, and I remember what it was like to get those grades and why everybody in this room remembers the day they became a CPA,” Moynihan said. “Technically, you were no smarter than the day before you got the grades. But in your heart you felt smarter and you thought the rest of the world thought you were smarter.
“And, my friends, what bothers me … is that too many members of our profession have forgotten that,” he said. “They have forgotten that they are special. They have forgotten that they are different; and that they have a responsibility to be different.”
“We have the most unique profession, despite how easy it is, or isn’t, to get into because we wear hats that no other profession I’m aware of wears,” Moynihan said. “You have a doctor; he’s an advocate for you. You have a lawyer; the lawyer is your advocate, right? Hire an engineer and the engineer will work for you. If you hire a CPA … to do your tax work, they are working for you. If you hire a CPA in an investment advisory role, they are working for you.
“But if you hire a CPA to provide attest services, they are not working for you. I can’t name one other profession where [a client] pays you to not be their advocate,” he said. “They pay us to be independent; they pay us to tell the truth. They pay us to tell the real story. … We have, in my opinion, the largest ethical responsibilities of any profession and the hardest to live up to. The public deserves to know that we do it right.”
Moynihan said that “we can only bring our profession back by … educating the public about what it is we do and don’t do and what our expectations should be.”
It’s not that it’s easy to be a CPA, but a problem with the perception of the public, which has only a vague idea of what a CPA does. The NYSSCPA is working to change that, Moynihan said.
“We’re going to reach out this year from the Society level to a ton of municipal and not-for-profit organizations and we’re going to talk about what audit services are about and what you should or should not expect from your auditors,” he said.
“We’re going to go to the Association of Towns, we’re going to go to the Government Finance Officers Association, we’re going to make them realize the quality of an audit really does matter and they have an ethical responsibility to see it’s done right.
Attention to professional ethics is another area Moynihan said is essential.
“And I’m not just talking about the ethics we’re hearing about today, but also enforcement,” he said.
And the rest of the responsibility, he said, rests on CPAs themselves. “If we don’t hold ourselves to that standard, then, ladies and gentlemen, we will be a failure.”
But the likes of Enron and Bernie Madoff have given CPAs a black eye and the profession a tainted reputation, Weil argued.
Weil said he believes that negative impression is not wholly untrue. He used as an example the liquidity crisis buffeting CIT Group, Inc. and its auditors.
“You’re PricewaterhouseCoopers or the auditor at PricewaterhouseCoopers,” Weil said. “You’ve got a clean audit opinion as of Dec. 31, 2008 and now the company’s own management is coming out and saying ‘We have substantial doubts about our ability to continue as a going concern.’ Every time you see that, what you expect to happen is all the financial instruments immediately have to be reclassified at fair value. But no! This company magically has the ability to not only go out of business but simultaneously hold its loans for investment.”
This, he said, presents a larger problem.
“How can we make these two representations at the same time? And each day you get closer and closer to where [PricewaterhouseCoopers] might have to make some type of consent to the inclusion of this prior audit opinion as a reference in the financial statements,” Weil said. “These are ethical questions. To fool the public into believing that these mutually exclusive representations are somehow consistent—that is an ethical issue.”
“That is an example of why Americans, why the general public, do not trust accountants,” Weil continued. “Because too often, every day, we’re confronted with examples just in the news—let alone the stuff we don’t even know about behind closed doors—where we can see that some people are just not doing their jobs to make the calls appropriately.”
But, Moynihan said, in this profession a single bad apple—or even a few—don’t have to spoil the proverbial barrel. Good audit opinions and ethical accountants don’t make for compelling news headlines. And CPAs have distinctive ethical responsibilities.
Accounting is similar to other professions in that some unscrupulous practitioners do exist, Moynihan said.
“With an audit, unless there’s a problem, unless there’s an issue, no one is going to know if the auditor did the work,” he said. The auditors who don’t do the work, he said, “are cheapening our profession.”
One example miffs Moynihan even more than Madoff: the Roslyn school district accounting scandal, which took place on Long Island in 2004.
“Why the Roslyn [scandal] bothers me is that no one used their brains,” Moynihan said. “You have a $75 million operation and the audit was done for $17,500. That’s not using your brain. The school district failed itself; the Board of Education failed itself; the profession failed itself.
“I’m afraid there are a boatload of Roslyns out there—they just haven’t bubbled to the surface yet. We have to be better than that. We can be better than that,” he said.
Weil pointed to another troubling example at the highest level: the chief accountant’s office at the Securities and Exchange Commission (SEC). Until recently, the chief accountant was Conrad Hewitt, a CPA with an inactive California license, Weil said.
“I knew from some other people that he hadn’t done an audit in about 30 years,” he said. So Weil said he called the state of California, asked about their licensure requirements and told them that he’d looked up the SEC’s chief accountant and found he had an inactive license.
“They said ‘Well it means he hasn’t fulfilled his continuing education requirements.’ As it turns out, since like 1990 he hadn’t,” Weil continued. “So not only has he not signed off on an audit opinion in like 30 years or so, he hasn’t been to a continuing education class in 15 years. And, still, the state allows him to call himself a certified public accountant. And this is a fellow in charge of auditing … and telling other auditors whether or not they can sign off on audit papers.
“No surprise, it turns out that over the next couple of years, he proceeded to pretty much unilaterally grant exceptions to [generally accepted accounting principles] to all sorts of companies,” he said.
Perhaps California allowed Hewitt to practice with an inactive license. In New York, as of July 26, that became illegal. New York state’s new accountancy reform law expanded the regulation of the profession beyond just those CPAs who perform attest and compilation services, now including New York-licensed CPAs working in government, tax, consulting and academia. It also requires that these CPAs register with the state and complete annual continuing professional education courses, and those who fail to do so—like Hewitt did, according to Weil—could face charges of unprofessional conduct, which could lead to a loss of license.
Before ending his address, Moynihan said he wanted to answer a question an audience member asked Weil during the first session.
“Do I think it’s OK that now you can become a CPA without having to do the traditional two years of auditing, working as ‘slave labor’ for a CPA firm?” “The answer is yes,” Moynihan said.
Under the new law, one year of experience is required if a CPA has completed 150 hours of education. That experience can be earned in industry, government, academia, tax or consulting services.
“I think we have to acknowledge our profession spreads across many different [disciplines],” Moynihan said. “I think what’s important, when it comes to ethics, is you have to ethically follow your limitations of what you’re allowed to practice. That’s putting even greater responsibilities on our profession at a time when that seems to be a big challenge.”
