Archive for December, 2009

It is December 31, and so many of us are getting ready to party.  Everyone is, except accounting bloggers and those who read their blogs.  So as to give you something to do tonight while you sip your diet coke, you can reflect over the high points of The Summa.


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I have occasionally written about the need for a professor to develop a mature worldview.  More so than that, we all (whether professor, student, or professional) should consciously develop a world view.  Yes, a world-view is a good thing.  Although there are three accepted forms for spelling the term, it is not a difficult concept.

A worldview is one person’s mental model of his/her reality.  It is a personal framework for organizing ideas, attitudes and theories about some aspect of the world in which a person lives.  When viewed in its totality, it is a personal description of the way all things work.

When we are young and/or inexperienced, our view is limited because we haven’t seen that much of the world.  Thirty two years ago when I first studied accounting, my worldview of accounting was pretty much limited to what was immediately in front of my nose (an only-in-front-of-nose-view).  Likewise, thirty years ago when I taught my first accounting class, my view of the world of accounting education was very limited.  It was not mature.  Never-the-less, I had a mental model of sorts.  Not a framework, it was more like a clothes hamper where I tossed my ideas and a few attitudes.  Somewhere along the path of my life, I built a few theories for explaining how a few isolated things worked (I always had teaching tendencies).  Eventually the clothes hamper was so crammed, disorganized and messy, I had to develop a framework for classifying and sorting everything.  So I worked on it.  And voilà–I had a worldview.

I’ve been asked to post a reading list for developing an accounting worldview.  I can’t, because it doesn’t work that way.  Here’s why.


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Albrecht is a blogging professor.

I’m a senior accounting professor.  The Summa is my expression of what and how I think about the world of accounting, i.e., the world according to Albrecht.

Why should anyone care?  There are a few ways to answer.

One possible answer is because society has decided that there be professors.  Professors-to-be are charged with studying in a discipline until such time as they are ready to teach others.  What criterion or criteria signal readiness?  I think it should be when he/she has sufficient understanding and wisdom to be able to teach students in the way they should go, or be.  This is a pretty tall order.  Over the years, I’ve claimed this is when a professor has a mature view on the way his/her part of the world works.

A second possibility is because it fits within a professor’s generally accepted professional duties.  The consensus is that a professor has three primary areas of responsibility:


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I’ve been blogging for 15 months now.   Many, though, have been doing it far longer and are much better at it than I.  So much so, that I have taken to allocating time every morning for scrolling down through a list of blogs for comments and updates.  Although I read some for information updating, I really enjoy the editorializing.  I try not to subscribe to a lot of e-mail updating, as it really clogs my in-box.

Dan Meyer (Austin Peay) has a blog worth visiting.  His Tick Marks blog (http://tickmarks.blogspot.com) on taxation has received a fair amount of recognition.   What I’m emphasizing today, though, is his blogroll.  A blogroll is a list of readable or favorite blogs, usually in the right hand column.  To be included in somone’s blogroll is an honor, as it means your merit a recommendation.   Dan Meyer spends a lot of time on his blogroll, making sure that it is just right.   He has a special class of blogs, though, called the 12 Blogs of Christmas. These are in emphasized font (bold) on his blogroll.  Some members of AECM (international e-mail listserv for accounting professors) have reached the exalted status of a 12 Blogs of Christmas:   Tom Selling’s Accounting Onion, Francine McKenna’s re: The Auditors, and Edith Orenstein’s FEI Blog.   So too, had one candidate for SEC Chief Accountant–Jack Ciesielski’s The AAO Weblog (not an AECMer, though).

If you don’t yet spend much time reading blogs, I recommend that you start.  A great way to start is to visit the Tick Marks site and daily click on a smattering of blogs (remember, the blogroll is on the right).  You’ll be glad you did.


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Are we asking for problems?

I’m busy with grading, so this is very brief.  Over at AECM a discussion has been held about issues related to providing an accounting education within a context of a 150 semester hour requirement.  I think re:  The Auditors put something up on it a while back.

A lot has been written about the not-so-hidden agendas of corporate management, auditing firms, politicians and the SEC.  Everyone is out to maximize their personal position, and no one is looking out for the public good.  Certainly not execs (earnings manipulation, greedy bonuses), nor the Big 4 (IFRS adoption, exoribant fees for shoddy auditing), Obama (bargaining away GAAP for political gain), SEC ( favoring big business and polital agendas).

Now, it is extremely obvious that our accounting programs are birds of a feather!  Many programs have shifted undergraduate accounting courses to the graduate level, and now charge an extra 50-100% premium for the same courses!  And, with graduate admissions requirements serving as a barrier to entry, not all accounting students have equal access to essential accounting courses.

Why have our collegiate accounting programs done this?  They’re money grubbing for extra tuition.  Oh, justification is attempted by saying that the masters credential is important, that higher level thinking is provided in graduate curses, that there is value added in general.

Folks, I’ve been there and much of the time all these reasons amount only to so much BS.  OK, there are some (a few) wonderful masters programs in accounting.  There are many, though, that don’t provide sufficient value for the extra bucks being charged.  I’m sure this comment is gong to make me very unpopular with my colleagues.


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A year ago, I posted some links to videos and/or whatever that helped divert my attention from the depressing task of writing and then grading final exams.  That page is still getting hits, but many of the links are broken.  It is time for an update.  Some of these links have some connection to business, accounting, or college.  Most don’t.  That’s why I’m recommending them.



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Edith Orenstein, in her exceedingly well done FEI Blog, quotes SEC Chief Accountant James Kroeker as saying:

Kroeker outlined six general areas that the SEC would have to “carefully consider … fully understand and address” regarding the potential use of IFRS by U.S. companies.  He added that this list is not all-inclusive. The six areas are:

  1. U.S. Investor understanding of and perspectives on IFRS;
  2. The development and application of IFRS for use as the single set of globally accepted accounting standards for U.S. issuers;
  3. The impact on the U.S. regulatory environment;
  4. Preparer considerations, including, among other matters: changes to accounting systems, changes to contractual agreements, corporate governance considerations, and litigation contingencies;
  5. Human capital readiness; and
  6. The role of the FASB in achieving the goal of a single global standard.

Kroeker noted, “I expect that you will hear more from us on this topic in the near term.”

James Kroeker

It is so depressing to hear James Kroeker speak of #2 and #6, as it reveals the SEC’s continued fixation on a single global set of accounting standards.

A global accounting standard is both unwise and misguided.  I’ve explained why many times.  However, just in case today is the day Mr. Kroeker checks out my blog, I’ll explain it again.


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Francine McKenna, author/editor of re: The Auditors and watchdog of the public accounting industry, has scored again with They Weren’t There: Auditors And The Financial Crisis.  Thus she continues to add to her single season scoring record.

U.S. auditing has never been very good.  The auditing of financial statements was voluntary in the U.S. until passage of the Securities Act of 1933 and the Exchange Act of 1934.  The Exchange Act also gave us the Securities and Exchange Commission.  Corporatations had a long history of disobeying accounting rules and publishing whatever.  Auditors were so unsuccessful in getting companies to properly report, that in the 1960s the U.S. explored junking the AICPA’s Accounting Prinicples Board as standard setter and turning to a newsly formed IASC.  Ultimately, it formed the FASB instead.

But companies had little concern for the rules because they could bully auditors.  And bully they did.  Auditor switching was pandemic by the 1970s, and the SEC passed regulation after regulation, hoping that shedding light on it would dry up the nefarious practice of marginalizing auditors.   By the early 90s, auditor switching slowed a bit, but the irrelevance of auditors didn’t change. Arthur Andersen (AA) was able to keep its clients, but it did so by playing ball.  After the 1990s bubble burst in the early 2000s, AA was driven out of business.

There was hope that SOX and its PCAOB would give auditors sufficient backbone to stand up to corporate bullies. There is anecdotal evidence that it worked in some industries.  But it is obvious that auditors were ghosts for banks and other financial statements.  Madoff–where where the auditors.  Banks–where were the auditors.   Frolicking in the wealth of their 404 audit fees.

So where where the auditors?  I’ll close with Francine telling us:

And so when I ask, “Where were the auditors?” and decry the fact that “they weren’t there,” it’s not due to some unreasonable, unfair focus on the most milquetoast of potential culprits.


I bang this drum because the auditors should have been there, as a last stop, where the buck should have stopped, as gatekeepers, watchdogs, advocates, and the last bastion of standards and expected values shareholders can look to.

But they weren’t. (Empahsis added)

You go, girl.

Debit and credit – – David Albrecht

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A lawsuit challenging the consitutionality of the Sarbanes Oxley Act of 2002 (SOX) is scheduled for review by the Supreme Court on Monday, December 7.

Key provisions of SOX are under attack. It is possible that SOX will be either voided or scaled back in the near future, threatening the very existence of the Public Company Accounting Oversight Board (PCAOB). The PCAOB was created by SOX for its implementation and administration. I hope the PCAOB is able to survive. We need it. Here’s why.

In reaction to (1) many scandals, most notably WorldCom and Enron, and (2) a decades long history of ineffective auditing by the Big 8-7-6-5 auditing firms that contributed to the scandls, Congress passed SOX to help clean up financial reporting in the USA. Did it nead cleaning up? Most certainly. At that time the US clearly had the best accounting standards (rules companies follow as they prepare financial statements) in the world. But some companies were in non-compliance and audit firms were not forcing companies to comply.

The key provisions of SOX are:

  1. Responsibility for the accuracy of financial statements clearly is placed on corporate executives. The CEO is required to sign a statement that the financial statements are correct. Violations leading to convictions result in jail time.
  2. Corporations had to secure an audit of their internal controls, and append the resulting auditor’s opinion to the financial statements. The intention was to give investors some assurance as to whether or not the internal controls were functioning well enough to ensure accurate data from which the financial statements would be prepared. No more GIBO (garbage in, garbage out). Generally accepted audit standards and various SEC provisions already had established that internal controls were to be present.
  3. A PCAOB (Public Company Accounting Oversight Board) was established (appointed by the SEC) to police the auditors. This policing took the form of annual inspections of the big boys, three year inspections of the smaller firms.

SOX should be retained because of these three provisions. Each of them is essential for U.S. capital markets.


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TWILAP, Two Weeks in the Life of an Accounting Professor.  Most people think I only work a few hours per week, just the time spent in the classroom.  They aren’t aware of all the behind the scenes activity.  In this series, I’ll journalize on what it’s like to be a professor.

Well, the party’s almost over.  Day 14 of two weeks.  My goals for today are simple.

  1. Catch up on the e-mail I didn’t get to on Friday.
  2. Make progress on writing about the Holy Grail of Accounting, a new blog essay.
  3. Make progress on writing about the accounting theory related to lease accounting, a new blog essay.

5:45-8:15 p.m. E-mail.  I assign papers in my Managerial and Cost Accounting courses, and a frequent topic is productivity.  Interesting article, “Recession or expansion, U.S. productivity continues to soar.”  The author notes that productivity in the U.S. is up 8.1%.  Unfortunately, the productivity increase is recession-driven:  layoffs mean that companies must do as much or more with fewer workers.  The key is to retain productivity gains during and after a recovery.  Professor James R. Martin, though, has assembled some data from World Economic Federation publications that reveal American economic competitiveness has steadily improved over the past 10-15 years to its number one ranking.

Over at AECM, a recurring theme is how huge, obscene government spending programs will eventually lead to multi-trillion dollar deficits, a loss of capital investment and eventual loss of productivity.  A clever and entertaining song from the popular culture doubt the long-term benefit of stimulus plans:

I don’t know if the following song adds value to any discussion, but it entertaining.

Bob Jensen at AECM informs of a song about Mark to market accounting (fair value accounting).  Thanks for the link, Bob.

Bob Jensen also links to a presentation by an invisible woman (Nicole Johnson).  Her message is inspiring.  She encourages all to continue on, even if the absence of recognition or appreciation.  This invisibility is the antidote to pride.  She says that we may never live to see the fruits of our labors, nor may we ever get recognized.  That doesn’t matter, for God sees.  And we see.


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Can You Help?

I have a former student (accounting major), a recent grad from BGSU, who is unable to find work after several months.  I recommend him without reservation–on a professional, academic and personal basis.

Can you help him get a job?

If you can help, e-mail me at albrecht@profalbrecht.com.


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