Andersen's Berardino Offers Guidance to Profession
Speaking at an American Institute of Certified Public Accountants conference in Phoenix Tuesday, former Andersen CEO Joseph Berardino offered his insights as to the crisis troubling both the accounting profession and corporate America and made suggestions as to how such a crisis can be overcome.
Mr. Berardino warned of a dangerous complacency on the part of the leaders of the remaining Big Four accounting firms, saying, "They think (what happened to Andersen) can't happen to them. Talk to me a year ago and I would have said the same thing."
He outlined five recent trends that he feels have helped shape today's business environment and which contributed to the crisis:
- Stock acquisition isn't just for the well-to-do anymore - more and more Americans are invested in the stock market through stock purchases, mutual fund investments, and 401(k) plan participation.
- Executive pay has become linked to performance and thus the bottom line determines how an executive will be rewarded.
- Media has contributed to an awareness of corporate performance as quarterly earnings reports are touted in the press and CEOs become more visible.
- Hedge funds have provided a new opportunity for companies to take risks.
- Potential conflicts of interest have become more visible.
Mr. Berardino recommends a change in audit opinions from a clean opinion vs. a qualified opinion to opinions issued on a graded scale. He also encourages a change from rules-based accounting to a principles-based model. And he added, "We must increase our ability to detect fraud."
Source: Electronic Accountant
FOX GUARDING THE HEN HOUSE
I'VE GOT SOME ADVICE FOR THE REMAINING FOURBIG FIRMS....FOLLOW THE EXISTING RULES, AND THE RULES THAT WERE IN PLACE BEFORE....INDEPENDENCE, ETHICS, ACCOUNTING AND AUDITING PRINCIPLES...THE PROBLEM IS THAT THE AICPA IS IN BED WITH THE BIG FIRMS, AND THAT HAS ALWAYS BEEN THEIR FOCUS.
Anderson a victim of external forces???
Apparently the demise of the Arthur Andersen accounting firm is due to five vague trends. This is the most bold and complete denial of personal and collective responsibility since the Cardinal Law noticed the unfortunate publicity surrounding the lawsuits without understanding that his actions and reactions had brought his organization to the brink of disaster. As the self-proclaimed smartest accountants around, how could AA fail to notice that its Houston office was being richly rewarded for its creative accounting and its nearsighted auditing. CPA's may never regain the public trust. If we can't accept the fact that AA was an integral part of a giant scheme to defraud investors we don't deserve the public trust.