Grant Thornton Weighs In On Accounting Reforms

Chicago-based Grant Thornton added yet another side to the multi-dimensional debate about the reforms needed to restore confidence in the accounting profession.

“As the leading global firm dedicated to the needs of middle market companies,” said CEO Ed Nusbaum in a press release, Grant Thornton feels that “growth should never be at the expense of public trust.” The firm cites a perceived “failure by some in the top management of the accounting firms to set a tone that puts professional responsibilities ahead of all other business considerations.” It proposes to restore the profession’s credibility with a five-point program.

The firm’s five recommendations are:

The major firms must make it clear through their management and policies that nothing is more important than their professional responsibility. Assurance, advisory and tax services must once again be the business drivers and focus for the auditors of SEC registrants.

Audit committees must do a better job of protecting shareholder interest, and regulators should take steps to ensure that audit committees are truly independent of management.

The Securities and Exchange Commission should revise the rules for proxy disclosures of non-audit fees. The current rules are misleading because they combine services that don’t represent a conflict of interest with those that do.

All standards should be set using a principles-based (rather than rules-based) approach. This applies to audit and independence standards as well as accounting standards.

AICPA should undertake a program to encourage sharing of best practices among firms in the area of auditing methodology.

Grant Thornton asks that all parties involved in serving the public interest (auditors, directors and regulators) embrace its five point program which is discussed in greater detail in the press release.

-Rosemary Schlank

Number of comments: 4

AccountingWEB.com Feb-5-2002
Categories: News Archives, Auditing, Firms
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Thomas Goodfellow , 09 February 2002 @ 02:48 AM
Here! Here!
Here here for Grant Thornton's call for a return to "Principles Based" Accounting (Item # 4.)
Those Enron fellows may have followed the rules, but it seems to me they had no view,
or their view of the basic accounting concepts and principles was way off beam. It's interesting, also, that at least two of the seven FASB members are former Andersen people. I won't mince words. It is very easy to perceive those Enron and Andersen fellows had a dark agenda, that has had a devastating and sinister effect on the profession, the business environment and most importantly on people. They were allowed to execute that agenda because of their unseemly influence and control - even on the FASB and EITF. For example, they were able to convert equity to income, recognize revenue that didn't exist and to keep substantive affiliates and material transactions and contingencies off of the financial statements. The rules may have been followed, but the rules in question do not, in my opinion, fulfill the established objectives of accounting principles. What's more, look at who sets the rules, how they were set, and who may have influenced them. If this perception is correct, then we accountants clearly have a problem of potentially devastating proportions.
How it will turn out, well, I don't know. But there don't seem to be any good excuses or explanations for those Enron and Andersen fellows. Like the 1980's movie, we need to go "Back to the Future" and rethink our whole model of reporting, compliance and enforcement. To my mind, more rules or different rules are not the answer. A return to basics is in order now.

Krista , 08 February 2002 @ 15:31 PM
What Grant Thornton really wants!
Grant Thornton is not trying to compete with the "big dogs" but rather show thier support for the profession.
They aren't trying to steal "big dog" clients either. They are only interested in serving the needs of the middle market clientele.
As for the article, I believe that CEO Ed Nusbaum strikes a new edge with this five point program. All firms need to step up and commit to a plan. Be a leader!
And that is what Grant Thornton wants!

Lawrence Carson II , 06 February 2002 @ 01:06 AM
Silence Protects
Nice comments however … "So what do we do?"

First of all there are only two problems in every company, in every professional association, or in any society. First "we don't want to" and second, "we don't know how to" … and everything else is merely mirroring Jack Nicholson's quote in the movie "A Few Good Men" ... "Son, you can't handle the truth!" Core Commitment or Core Competency ... and that's the "bottom line".
Over 130 people at Enron knew of the problem when the seeds were originally planted years ago ... but "They didn't want to" tell the company's owners (stockholders) for fear of loosing their job.
And ... Andersen's grunts (the audit team) all know that what was being reported as facts ... truly abdicated their duty to "tell the truth" in the annual audit reports. The ethics of one’s fiduciary responsibility as an auditor was drilled into their heads in their third year of college accounting. They knew.

Andersen's audit team - I would bet at least 60% of them - knew exactly what should have been done ... but "They didn’t want to". And why? So they could protect 1.Their jobs, 2. Their image in their company's culture so that 3. There was a possibility that some day they could be promoted ... within a culture that promotes facts over truth ... silence over warning alarms ... image over professionalism ... and prestige over professional integrity!
So, until the AICPA - with the support of congress and the SEC - states that organizational culture will be reviewed and reported on within the notes of all year end financial statements ... we the owners (and institutional investors) of corporate America will continue to be deceived in silence.
Human metrics drive financial metrics. We all know this. And for a point of “truth” … we also now know that there are 86 human metric attributes that can be monitored and measured that predict - with a 95% statistical accuracy - the financial index of all organizations. So why don’t report to the stockholders these findings?
Go back to my opening assertion. We either don’t really want to or … we don’t really know how to. You figure out which one our Professional Society is still avoiding … in silence.
For those seeking to learn more feel free to contact me at LJohnCarson@MSN.Com.

Mr. Pratt , 05 February 2002 @ 22:41 PM
Once again
Once again here we go. Grant Thornton is trying to compete with the big dogs. Why now all of a sudden are they coming with a 5-point plan, why not a year ago? You know and I know why, it's because of the whole Enron/AA scandal. The points are valid I just question the sincerity of Grant Thornton. Is this just and attempt to get more business???