Were accountants responsible for the dotcom bubble and burst?
A discussion has surfaced on our UK sister site, AccountingWEB.co.uk, regarding to what extent did involvement, or lack thereof, by members of the financial profession, contribute to the dotcom boom and bust.
The suggestion is that a habitual reluctance to get to grips with information technology is one of the accountancy profession's biggest problems.
"Were accountants responsible for the dotcom bubble and burst?" This worrying allegation emerged from a question two weeks ago at the ICAEW IT Faculty annual lecture.
During a thought-provoking talk on Second Life and related issues, Clive Holtham mentioned the dotcom bubble, which prompted the pointed follow-up question from one audience member.
The answer was that they weren't - which accorded with the general audience reaction. The reason? Accountants, Holtham argued, had not made the investment and business decisions that fuelled the boom and led to the bust.
Some would argue that this is exactly why accountancy, perhaps more than accountants, was responsible. Why weren't accountants more involved in these decisions? We would surely expect accountants to have been stressing the need to temper the wild enthusiasm with a bit of solid business analysis. It's hard to escape the conclusion that accountants either didn't put forward the right arguments, or were not sufficiently influential. Accountants either lacked the confidence to participate forcefully enough in the debate, or were viewed as not knowing enough about IT.
Either way, it suggests that the main accountancy bodies had allowed a major change in business to occur without preparing their members to deal competently and confidently with it. If technology had been seen as a natural competency of an accountant, accountants might have been more able to fight their corner over the excesses of the dotcom era.
Anyway, that was years ago. Surely things have changed. The recent AccountingWEB/National B2B Centre survey on accountants' involvement in ebusiness was introduced in the following terms: "In spirit accountants would like to get involved with ebusiness, but the reality of their current knowledge and workload means that only a small minority are able to help clients take advantage of new technology opportunities."
It's unfair to blame the accountants themselves. Their workload is a significant factor. Government has been piling regulation after regulation upon them and it must be a struggle to keep up with just what they consider their core skills and knowledge. Ethically, you would not expect accountants to offer advice in areas in which they do not consider themselves adequately qualified. Technology is such a vast and rapidly moving area that it's pretty hard for most full time IT professionals to keep up, let alone accountants with their myriad other responsibilities. Yet the need, and opportunity, certainly seems to be there. Various government initiatives in the past have sought to identify sources of competent advice to help companies succeed in ebusiness.
Usually, articles about accountants doing more in the field of IT elicit comments about "leaving it to the IT professionals". The worry is that accountants may not know enough to be able to do so confidently and therefore they withdraw from any involvement - this is what the AccountingWeb/NB2BC survey seems to suggest is happening. This is in nobody's interest. Businesses may fail to exploit key opportunities, accountants will lose out on income and probably credibility, and IT specialists will have fewer clients. A more ebusiness-confident accountancy profession should be able not only to offer advice itself, but also to recommend, trust and work with specialists where required.
To achieve this it's vital that the professional bodies help their members more than they are doing currently. What seems to be missing is a set of boundaries. What exactly do accountants need to know about IT and ebusiness in order to be able to confidently and competently advise their clients? How can you, as an accountant, assess your competence in this vital area?
It's not as if this is anything new, The International Federation of Accountants (IFAC) has been working on a revised Education Practice Statement regarding 'Information Technology for Professional Accountants' for years and in October 2007 released International Education Practice Statement 2 (IEPS 2) after consultation with accountancy bodies worldwide. This sets out "IT knowledge and competency requirements" for the qualification process, but also for continuing professional development.
So should accountants be more active in advising on ebusiness? Should they do it themselves or work with specialists? And are the professional bodies doing enough to help their members in this, and other IT related, areas? We look forward to hearing the views of AccountingWEB members so that we can carry this debate forward.