In recent posts, I’ve argued that non-compliance is a common response when people are required by law or rule to do something, such as when executives are required to submit periodic financial disclosures for their corporations.
To help readers develop a clearer understanding, I’ve frequently used traffic speed limits as an example. In the U.S., non-compliance with traffic speed limits is the rule rather than the exception. Of the last 500 people I’ve asked, only two have said that it is their intention to never, ever exceed the speed limit. The other 498 admit that it is frequently their intention to exceed the speed limits, sometimes by a lot. Not one of the 498 has ever apologized for his/her behavior. A study by the Ohio Turnpike Commission reports that the average speed on its highway is 14 mph over the speed limit.
It is that way in the business world. Corporations (and the people that run them) are charged with accurately complying with required information disclosures (and other rules). Non-compliance is common. How common? We’ll never know for sure, because it is impossible to monitor every action all the time for every person, let alone monitor the monitors.
I had an argument with another professor over it. She argued that corporate compliance with the rules that govern financial statements (and by implication) was almost absolutely perfect. She contended that compliance was far in excess of 99%. I disagreed. I think the numbers are fudged (sometimes in a small way, sometimes in a major way) in a majority of corporate financial disclosures. It is, after all, a part of the corporate mentality.
I’m presenting two video clips by Mike Adams of FoodInvestigations.com which I hope will help you understand the prevalence of the corporate mentality. In these two clips, it is alleged that certain breakfast cereal producers make misleading claims in their advertising–about the presence of blueberries in their blueberry cereal. I do not know if these allegations are true. Since advertising is the product of someone’s corporate mentality, I wouldn’t be surprised if some advertising is in fact misleading. However, I don’t know and I’m not saying that these allegations are true or false. All I’m doing is presenting an example of the public perception of the accuracy of some breakfast cereal advertising.
Wouldn’t it be something if an auditor’s opinion was designed to help us only imagine accuracy in corporate financial statements?
Debit and credit – - David Albrecht