Archive for February, 2012

Eide Bailly, North Dakota’s largest audit firm (#24), and Wisconsin based Wipfli (#30)  have called off merger plans.  A press release, issued jointly on Friday, February 24, 2012, reads:

Executives of Wipfli and Eide Bailly, two prominent accounting and consulting firms that rank among the largest in the country, today announced the firms would not complete a proposed merger. The firms decided not to proceed with the proposed merger and will continue to operate as separate CPA firms.

Eide Bailly managing partner and CEO Jerry Topp and Wipfli managing partner and CEO Rick Dreher said the firms decided to amicably discontinue merger discussions, because they could not come to an agreement on key terms.

“We have tremendous respect for Eide Bailly, its partners and staff,” said Wipfli’s Rick Dreher. “In the end, each firm decided it was more appropriate to remain independent.”

Eide Bailly’s Jerry Topp said, “Wipfli and Eide Bailly are two very successful firms serving distinct markets. We were friendly competitors before, and we will continue to be friendly competitors in the marketplace as we move forward.”

Eide Bailly is a significant employer of graduating accounting majors from Concordia College (Fargo metro area), ProfAlbrecht’s current school.

Debit and credit – – David Albrecht

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Inject a bit of information technology into everyday life, and you can increase productivity.  Inject it indiscriminately and there is a control problem.

A year ago, I wrote about the security problem associated with high tech photocopiers in, “A Control Problem.”  Today I’m writing about the RFID chip embedded in new credit cards and bank cards.

RFID is the acronym for radio frequency identification.  When radio waves of a specified frequency bounce off whatever contains an RFID chip, it returns information embedded on the chip (At least, I think that’s how it works).  It’s very useful for paying tax on tollroads, or for tracking items during shipment.

As reported by Bob Segal, credit card companies are now embedding RFID chips into traditional plastic credit cards.  When such a card is within range of a specialized RFID reader, it reads key data off the credit card, such as card holder name, card number, expiration date, and security code.  Such information can easily be used to create a duplicate credit card which in turn can be used practically anywhere by anybody.  Protection is available, if you take it.

David Fordham of JMU reminds there is protection in the form of special lined wallets and plastic credit card sleeves with embedded metal flaking.  New credit cards sent through the mail should contain such sleeves, but I don’t remember seeing one.

I never cease to be amazed at how well the media can exploit the Fear, Uncertainty and Doubt Factor (FUD) with the uninformed general public rather than straightforward information delivery. And how beautifully some fast-buck artists exploit the public’s fear.

This issue was widely publicized several years ago when the state department began issuing the RFID passports. The big question I have is: “Why is there anyone still around who doesn’t have the wallet with the foil built into it?” My neighbor across the street, who is a perennial Luddite, was all up in the air about this a few months ago, so I went over to Dollar General and got him one of the new wallets with the foil lining. For $2.98 plus tax. Sheesh.

My credit union has a stack of the RF-protection sleeves free for the taking sitting in a box by the door.

Still, the metal lining isn’t a perfect defense. Credit cards are at risk of having information being intercepted when removed from the protective wallet. A poacher could camp out near any check out kiosk and steal the information.

There’s a similar problem with the potential for pregnancies from sex. Some sort of barrier, like condoms, works effectively in preventing sperm from reaching the egg. However, failure to use a condom (happens all the time) can result in unwanted pregnancy. I think the same danger exists here. The metal sleeves can prevent identity theft, if only they are used.

Thanks to Bob Jensen of AECM for the alerting me to the danger, and to David Fordham for attempting to allay my fear.

Debit and credit – – David Albrecht

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Wonder why my blogging has faded during recent weeks and months?

Throughout this school year, I’ve been an accounting professor by day and a job seeker by night.  Why?  Don’t I have it great at Concordia?

Well, yes.  Concordia College in Moorhead, MN, is an exceedingly fine school.  It recently upgraded its business school to a named school–Offutt School of Business.  The students are very smart, study long hours, and love their professors.  I love the students (but only in an appropriate manner), and I like the other professors at Offutt despite the occasional eccentricity.

Although some think the only reason needed for moving is the cold and snow of a northern plains winter, the weather isn’t my reason for moving.  This winter is mild.  It has been a balmy +20 F this week and has snowed twice, yet I’ve seen two male students at the college wear shorts outside.  I’m sure there are others.  I’ve been walking around campus without coat or jacket, comfortable in a sweater.

Will ProfAlbrecht's next school be a better fit?

I’m looking to get back to an AACSB school, hope to find support for my transformational experiment in social media, and want to find a school that will be happy with my educational and practitioner-oriented publications.  In other words, I desire a better fit.

The process of accounting faculty recruiting is long, starting in August and continuing for some schools until March.  It is a high stakes game for both school and professor.  At the top research schools, the salary and resource investment in a five year probationary period could easily hit $1,150,000 (not including fringe benefits).  For a regional public university, it could run $400,000-650,000.  For a liberal arts school, it could be a third less.  If a hire doesn’t work out (philosophical differences, incompatible styles, low productivity, personality conflicts), there is major non-quantifiable disruption.  I’ve seen grumpy professors, and trust me when I say that you don’t.

It is a larger investment on the part of the faculty member, because we’re talking about a major portion of his/her life.  Pick the wrong school, and it can break a career or lead to divorce.

I feel like an expert, having gone through the recruiting process three years ago, and again this year.

Throughout the process described below, I’ve met many wonderful people.  I’ve identified many schools at which I would love to teach and work.  But in the end, I can marry only one.

The recruiting process starts in July when the first position announcements get listed at the American Accounting Association web site.  Early on, there were 150+ open jobs.  Because the past few years have been economically difficult, there was a backlog of professors wanting to move.  Many recruiters told me it was a buyer’s market (and I’m a seller).  I responded to about 50 announcements, ruling out the west coast and heavy research-oriented schools.  At the national conference in August, I talked with representatives of 15 schools.  I was disappointed when most never called me back.

Throughout the fall and winter, at least 100+ more positions came online.  I applied to about 30.  Some schools moved quickly, interviewing candidates on campus in November.  I interviewed at two schools that at first seemed promising.  I later figured out the lack of fit, and was relieved when neither offered me the position.  Yet I was frightened at the same time, fearing that perhaps no school would hire me.

Into the spring semester, several schools contacted me for preliminary phone interviews.  I found these difficult.  The schools were looking for clues as to whether I would fit in, but each school was looking for a different clue.  The brevity (30 minutes) and lack of visual communication really limits effectiveness.

Eventually, I went on three campus interviews during the spring, accepting the first three invitations.  Eight other schools followed with invitations, but the timing just didn’t work out.  I was able to make up classes, so students at Concordia College didn’t suffer.

A campus interview for a professor is pretty standardized.  There is usually, but not always, a research presentation.  At different schools I presented on either using social media in higher education or how economic consequences impact accounting standard setting.  These presentations are a real crap shoot.  Three years ago, I made a presentation and two faculty members started arguing with me during my literature review, before I even got into my work.  I was torpedoed.  Sometime I am stimulated and thrilled by the experience.  I try to make my presentation interesting, but who knows?  In general, I like these things.  The attending faculty members get an opportunity to show their manners, or lack thereof.  And I like to talk (and write) about new ideas.

Then there is teaching a class, which also is difficult.  Effective teaching depends on a close relationship between professor and students.  Engagement is the key to learning.  Yet, it seems as if recruiting schools want to see a flashy lecture.  I struggle with teaching presentations because I’ve learned about death by PowerPoint.  Also, do schools realize that their students are on trial?  In one of my presentations, not one of the 30 students had studied for the day.  They were lethargic, and I simply couldn’t get them to loosen up.  At another school, students got into it.  One student (not a member of the class), said that it was the first teaching presentation in which she had ever learned anything.

Then there are faculty discussions, large group (i.e., recruiting committee) or a series of one-on-ones. I always like these, and both sides can learn whether or not it is possible to form a working relationship.  I think some schools err by not having both types of discussions.  Sometimes I’m looking for revealing answers, and these never come out during group discussions.

Then there is food.  Professors understand there is no such thing as a free lunch, unless it is associated with faculty recruiting.  Faculty candidates get scheduled for breakfast, lunch and dinner (say hello to my ten new pounds).  The meals are scheduled at the favorite (fancy) restaurants of the local faculty (If you’re going to get a free meal, better make sure it is one you’ll enjoy!).  The meal I most appreciated was at a budget diner where I ordered four hot and competently prepared vegetables.

So, where am I?  In close negotiations with a school.  I am hopeful of making an announcement in a week.

I love getting to visit other campuses.  Everywhere I go, I add to my LinkedIn network.  Thanks, everyone.

Debit and credit – – David Albrecht

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Friend Bob Jensen has described this valentine as pretty bad.  My special someone won’t even thank me for it.  If you can come up with a better accountant’s valentine, please post it as a comment.  — profalbrecht.

Last year, I wrote, “An Accountant’s Valentine.”  Was it written for how I feel about accounting, or a someone special?  Can’t say.

I wrote another this year.

My love’s not like a red, red rose
That on Valentine’s runs amok
It’s more like a warm, warm breeze
Cuddling my summer ‘ammock.

As fully amortized tables
Eer keeps balance in its place,
The smiles of my true lover
Pulse from heart to face.

Business lacks a proper voice
Until it speaks accounting,
My heart spoke neer a word until
She heard my love’s accounting.

To accountants everywhere, happy Valentine’s Day.

With apologies to Robert Burns (A Red, Red Rose).

Debit and credit – – David Albrecht

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John H. Biggs, former CEO of TIAA-CREF

John Biggs, CEO of TIAA-CREF from 1993 to 2002, recently submitted to the PCAOB a comment letter about its auditor rotation proposal.  In it, Biggs voiced his support for mandatory auditor rotation.

In his capacity as CEO of TIAA-CREF, Biggs was more of an investor than a reporting corporate CEO.  TIAA-CREF accepts contributions from teachers and their schools, invests them, and upon a teacher’s eventual retirement provides a pension based on the accumulation.

TIAA-CREF changed its auditor twice during Biggs’s tenure as CEO.  From his experiences, he concludes that auditor quality increased as a result of the switches.  Moreover, TIAA-CREF’s audit fees did not change.  Biggs challenges the accepted wisdom that costs to audit firms increase 20% upon a change in auditors.  He suggests that the 20% is a blue sky number proposed by people desiring to defeat the auditor rotation idea.

Biggs reasons that auditor quality increases because the departing auditor desires to leave the engagement with everything fully disclosed and in good shape.  The new audit firm is able to review the working papers and decide for itself what additional investigations need to be performed.

In his 2002 Senate testimony, Biggs had this to say:

[H]ad Enron been required to rotate its auditors every five to seven years, it is unlikely that misleading financial reporting would have continued or that the Board’s Audit Committee would have been kept in the dark, as they claim they were. It is also conceivable that, if they had been confronted by a group of different non-compliant auditors, senior management might have hesitated to engage in some of the financial manipulation they appear to have carried out. Honest financial reporting from the beginning also would likely have resulted in more reasonable stock valuations.

Biggs disagrees that an audit firm should be a corporation’s partner, and says partnership is a threat to auditor independence and trustworthy financial statements.

You can read Biggs’s comments here:

Thanks to Jim Hamilton for the tip.

Debit and credit – – David Albrecht

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Valentines for Bloggers

Mark Schaefer writes the {Grow} blog.  Today he suggests that Valentine’s Day (February 14) should be the day when you hug your blogger.

I agree.  If you have a favorite blogger, why not send words of appreciation, about making a difference.

Debit and credit – – David Albrecht



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The Center for Audit Quality (CAQ), a special interest group that lobbies for and promotes the audit industry, has issued a second video, “The Financial Statement Audit.”

These videos are appropriate for high school and college students taking introduction to financial accounting, who desire to learn a few simple basics about what auditors do.

As you would expect, the videos provide no discussion of how the audit profession is attempting to deal with the many intractable problems limiting auditor effectiveness.  In the videos, auditors are vigilant servants of the public interest who never fail.

The first video in the series was called, “The System of Investor Protection.”

Thanks to Bob Jensen for the tip.

Debit and credit – – David Albrecht

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There is so much for me to do today that I must think about whether to interrupt work and take a restroom break.  And a few things have not gone my way. I feel stress, pressure and angst.  It’s time for relief.

Good friend Woodie today sent an e-mail with links to three clever, funny and memorable commercials on YouTube.  Watch them, then I’ll make a few comments at the end of this post.

The De Lijn Company employs talent and has sufficient resources to make slick commercials such as these.  But not everyone with talent and resources does such good work.  It takes commitment and creativity.

Do you have a passion to turn any task worth doing into a task well done?  You should.  It shows.

I love the team work of the penguins, ants and crabs.  Glad I didn’t have to face them.

Debit and credit – – David Albrecht

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The EU and the United States are considering mandatory auditor rotation.  Some have opined that this will lead to nomadic accountants, auditors who move every five years in search of green fields of audit clients to graze upon.

Bob Jensen (Trinity University retired professor) is a prolific web surfer who posts his finds on AECM, the e-mail listserv for accounting professors.  His finds relate mostly to accounting.

Jensen has occasionally wondered about lifestyle issues for auditors forced into a nomadic life.  Today he suggests that housing issues can be solved by building a Mongolian Ger (call a Yert in Russian).  The following Dan Grossman video shows how a Ger can be built in about one hour.

But what about the inside?  Could it possibly be spacious enough for the 21st century auditor and all his/her toys?

However, we all know that large firm auditors stay in luxury hotel accomodations:

Lowell Hotel, NYC

I ask my auditor readers.  Where would you rather live, Ger or luxury hotel room?

Debit and credit – – David Albrecht

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There are a lot of misconceptions about social media usage in higher education.  In a similar fashion, there are lots of misconceptions about controlling costs in higher education, or in controlling healthcare costs in America.

from Mashable Social Media

When President Obama talked about controlling costs of higher education in his recent State of the Union Address, he really was talking about the prices charged by educational institutions.  If the President had been concerned about controlling costs (money spent in instructional or business operations), he would have discussed whether to use more non-tenure track faculty to decrease wage expense, or reining in the administrative bureaucracies that have been created to deal with government imposed reporting mandates, or in revising the priority of resources directed toward not very valuable research and publishing.  I would find these alternate discussions more interesting and useful than controlling prices.

When Senators and Representatives talk about controlling healthcare costs, they really are talking about the prices paid by citizens, their insurance companies, and the government.  If they really were concerned about controlling healthcare costs, they might debate the value of billions spent in reimbursement paperwork, or the tests performed by physicians mindful of potential litigation, or perhaps on limiting or increasing the availability of healthcare to certain segments of our society.  I would find these alternate discussions more valuable than controlling prices.

Likewise, when journalists and bloggers write about social media usage in higher education, they usually are talking about social media marketing.  Oh, they could be talking about using social media in the classroom, but they usually aren’t.  They could be talking about adoption of social media by professors as they pursue their responsibilities in research & publication or service.  But they aren’t. I would find these alternate discussions more interesting and useful.

The media focus seems to be on the use of social media by colleges and universities to recruit students, as shown by the infographic from Mashable Social Media.  The sad reality is that social media usage in higher education tends not be applied for other reasons.   There is increasing interest by professors in using social media in the classroom.  However, my experience is that professors use social media to replace outdated or stale applications.  They don’t use social media in a truly innovative fashion.  And finding a new breed of professor–a social media savvy professor–is next to impossible.  Schools simply wouldn’t know how to use and benefit from such a creature.

Debit and credit – – David Albrecht

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February 2 is Groundhog Day observed in North America.  As lived in folk culture, if a groundhog checks outside conditions this morning and sees its shadow, then six more weeks of winter are sure to follow.  If the sky is overcast and the groundhog can’t see its shadow, then spring is about to arrive.  A large Groundhog Day celebration is held in Punxsutawney, Pennsylvania.

Groundhog Day received a boost in popularity with the publication of the charming 1993 Harold Ramis film, Groundhog Day.  Bill Murray plays an exceedingly self-centered Phil Connors who must relive February 2 over and over again until learning to serve others instead of self.  I love the film, and consider it one of the finest ever made.

In the world of regulatory accounting, we can reflect on what a Groundhog Day forecast will predict, a longer time of winter or a new time of spring.  It seems as if we have been reliving (metaphorically, of course) a broken world of accounting.  Accounting is misapplied by corporate executives over and over again, leading to prolonged winters of scandal.  Large audit firms prolong this winter because they selfishly serve their own business interests instead of the public.

Of course we all know the forecast:  a longer time of winter.  There is nary a hint of changed conditions that would lead to selfless reporting of corporate financial results. We seem doomed to relive past cycles of accounting scandal.  Where is the accounting world’s Phil Connors?  Stuck in a time warp.  Just as are we.

Debit and credit  – – David Albrecht

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