Archive for March, 2012

Some of the guys in my Intermediate Accounting class decided we should have a bracket contest. There is no prize, but I may bring pizza as we celebrate the winner.

I’m proud that all have done such a great job.  Everyone, including Nate (score of 800) is above average with percentile scores of at least 63.

Ian is in second, Andy in third, Brandon in fourth and Andrew in fifth.  It is likely that Ian will win.

It takes superior accounting talent to do so well in prediction contests.  Go J-Hawks!

Debit and credit – – David Albrecht

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On Wednesday, March 14, 2012 (10th year anniversary of audit firm Arthur Andersen’s felony charges), the Chicago Tribune published an editorial titled, “Andersen Died in Vain.”  As is the way with all editorials, what followed is the editor’s opinion.

Take heed, the Chicago Tribune and its editor are wrong on this. The Arthur Andersen audit firm didn’t die to accomplish a great purpose, or to make the world a better place.  It died because it couldn’t survive its punishment.  And if anyone or anything has ever deserved punishment, it was Andersen.

Arthur Andersen’s death was not intended to prevent defrauded investors from being  victimized in the future.  The death was intended to prevent Andersen from doing it again.  And in that Andersen’s punishment has been successful.  Its death was not in vain.

In the editorial, the  Chicago Tribune does a fairly decent job of summarizing the history surrounding Andersen’s demise:

In the beginning, Andersen was a watchdog. Founder Arthur Andersen made the firm’s name stand for something nearly a century ago, when he refused a client’s demand to approve a ledger that falsely inflated profits. For decades thereafter, an auditing opinion from Andersen was the gold standard for corporate books and records. If Andersen said the numbers were solid, then investors, bankers, regulators and the public at large could count on it.

Over time, greed corrupted Andersen. Its leaders became more devoted to collecting hefty fees than keeping books straight. Clients paid a fortune for Andersen’s consulting services, making its basic function of auditing into little more than an afterthought. The firm’s most experienced accounting technicians, the sticklers who maintained its principles, saw their status plunge in the partnership’s hierarchy. As Enron ran wild, Andersen’s Professional Standards Group proved too weak to intervene. Money had trumped honest services.

Enron’s executives were able to lie about their business performance and prospects because Andersen went along. When the lies caught up with its client, instead of admitting its failure to safeguard the public trust, Andersen engaged in a cover-up. Its employees shredded not just a few Enron-related documents, but box after box, day after day, for a period of weeks.

The Enron debacle followed a series of debacles at Andersen, which had bungled audits atWaste Management Inc.and Colonial Realty Co., to name but two prior scandals that cost investors dearly. Prosecutors who previously had stopped short of bringing charges against Andersen came to believe that its leaders considered civil penalties and promises of reform to be mere speed bumps on the road to ever-greater profits.

A decade ago this month, Andersen’s brass arrived in Washington for Enron-related settlement talks — myopic, arrogant and devoid of remorse. Justice Department officials concluded that the repeat offenders across the table would offend again if they weren’t stopped.

If anything, the Tribune is underplaying the wrongdoing.  Andersen was dirty, very dirty.  Charged with protecting the public interest, Andersen instead unzipped its pants and metaphorically peed all over it.  There ought to be a law.  Shouldn’t justice prevail in the end?  In this case it did.

The Tribune goes on to say,

Did Andersen’s demise serve the public interest? No.

There were thousands of innocent victims, the out-of-work employees.  … [The resulting] Sarbanes-Oxley legislation … has proven to create problems, substantially raising compliance costs for law-abiding public companies, which pay more now in audit fees to Andersen’s onetime competitors.

The greatest tragedy of Andersen’s fall? It fell for nothing. What a loss for Chicago, and what a disservice to all those like Arthur Andersen himself who never would sell their integrity, at any price.

The world is worse off because Arthur Andersen and the other largest audit firms forsook their duty to investors and the American public.  If Arthur Andersen had been doing the right thing in the decades preceding its death, perhaps I wouldn’t have lost much of my life’s savings in 2001-2002.

Andersen deserved its punishment.  I shed no tears for it.  Its death was not a tragedy.  Its forsaking the public trust was the tragedy.  There ought to be a special place for those who violate the public trust.

Andersen’s death means only that it was not allowed to continue making the world a worse place.  A positive from its death is that there have been no Andersen audit failures since 2002.

The Chicago Tribune errs in labeling Andersen employees as victims.  The employees were part of a seedy culture, and it was the culture that supported the actions which merited the punishment.  The employees could have left.  If anything, Andersen principals should have been banned from ever serving American capital markets as corporate officers or auditors.

The death of the Arthur Andersen audit firm marks the end of a sad chapter in American history.

Debit and credit –  – David Albrecht

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Just read an interesting piece at the Chronicle of Higher Education, “Aging Professors Create a Faculty Bottleneck,” by Audrey Williams June.   It is combined with two other stories, “Exploding the Myth of the Aging, Unproductive Professor,” by Josh Fischman, and “In Search of a Professor’s Legacy,” and David D. Perlmutter, to provide a healthy portion of food for thought.  A subscription is required to read these articles. Reasonably priced day passes are available.

I’m a baby boomer, and some of my readers are also.

Are we unproductive paper weights or still pulling our weight (gets more difficult as pounds accumulate)?  Can we still lead the way, or are we in the way?

Professors are not constrained by a mandatory retirement age.  But then, neither is an accounting professional who has become an independent consultant.

I feel fortunate to be at my stage in life–alive.  Growing and flowering, not withering.   I’m invigorated by the challenge of teaching new students.  And, writing for the profession has given new meaning to my professional existence.

Lurking in the shadows is my need to work.  Like many accounting professors, I didn’t get started until my late 30s.  My savings aren’t where they need to be to provide a desirable retirement lifestyle.  Professors who share my circumstances often joke about dying in the saddle.

There are no words of wisdom from me.  If you have thoughts on the issue, please comment below.

Debit and credit – – David Albrecht

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I’m an accountant, and this is my weekend.  I opted for the busy spring semester of academe instead of  busy season.  But on this weekend we can all take a break.  It’s the opening weekend of seven post-season D1 basketball tournaments.

There are many dozens of basketball games, with four tournaments for men’s teams (N-68, NIT, CBI, CIT) and three for women (N-64, WNIT, and WBI.

There are games to score, statistics to tally, and bracket contests to administer.   You do bracket contests, right?  Print out a blank tournament bracket and pencil in your predictions for every tournament game, 67 for the N-68 and 63 for the N-64.

Bracketology takes on a second meaning for an accountant–how to score the brackets for your contest.  I prefer weighting the first weekend heaviest, say 32 points for the 1st round (1 pts each game), then 32 (2), 24 (3), 16 (4), 10 (5), 6 (6).

This year I filled in brackets for the N-68 (men) and N-64 (women).  I did not fill out brackets for either of the NIT tournaments (men or women), although I have done so in past years.

I like bracket contests that are free.  After all, pride trumps any amount of money.

I teach an evening section of Intermediate Accounting for guys who can’t make it to the day section.  We decided to have a bracket contest scored by ESPN.  There are 320 pts each round, with points per victory depending on the round:  10-20-40-80-160-320.  I went with non-trendy pick Kansas.  So far, my crystal ball seems to be cracked. I’m standing at 20/32 and 10/16 for the first two rounds.

On the women’s side, I’m 25/32 in predicting 1st round winner.  I predict Baylor to win.

Remember, if you have money bet on your bracket and win,  then you must report it on your 1040.  Ask your contest administrator for a 1099.

Debit and credit – – David Albrecht

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Lobbyists - because it's hard for politicians to decide stuff on their own.

Reuters broke a story on Friday, March 9, that I find to be very, very troubling.  In “Exclusive: Ernst & Young tightropes between audit, advocacy,” reporters Dena Aubin, David Ingram and Sarah N. Lynch say that,

Corporate audit giant Ernst & Young operates a lobbying firm in Washington, D.C., that has been hired in recent years by several corporations that were at the same time E&Y audit clients, prompting two senior lawmakers to demand closer regulatory scrutiny.

As identified in the story, the lobbying arm is Washington Council Ernst & Young.  I’ve heard of it before.

All of the Big 4 claim to partner with their clients.  I’ve argued for years that such a relationship seduces audit firms sometimes to approve questionable financial statements.

Surely lobbying for a corporate client is way over the line.  I doubt that any audit firm that in Washington advocates for clients would fail to do the same when considering an opinion on financial statements.

Aubin, Ingram and Lynch report that E&Y spokesman Charles Perkins disagrees:

Ernst & Young said Washington Council’s work complied with independence rules. It was pre-approved by clients’ audit committees and it was limited to tax-related issues, E&Y spokesman Charles Perkins said in an e-mailed statement.

The firm does not solicit votes on legislation for E&Y audit clients, Perkins said.

“We assist clients in monitoring public policy, analyzing legislation and educating Treasury officials, the IRS, legislators, other policy makers and their staffs about the potential consequences of legislation,” Perkins said.

I have always thought that one way to describe lobbying is it educates government officials about a client’s position, and the potential negative consequences to the client of proposed legislation or regulations.

Whether within the letter of the rules or not, E&Y lobbying stinks.  It reminds me of E&Y clean audit opinions on Lehman Brothers financial statements distorted by Repo 105.  E&Y thought that was within the letter of the rules, also.  It didn’t make it any less stinky.

Debit and credit – – David Albrecht

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Rachel Torgerson is an accounting major, and she woiuld like you to vote for her.  I hope you do.

Rachel, 20, from Moorhead, MN, is a student at Concordia College.  She is my student, now taking her second and third courses from me.  She’s a good student with a story to tell.  I’ll relate a bit of that story, and ask that you vote for her in a Maurice’s modeling contest.

Winning the contest is rewarded with a sizeable corporate donation to Rachel’s charity, and it is worthy of your support.

Rachel received an organ transplant when nine months old, and has had several subsequent operations.  Until she asked for my vote, I never knew.  She appears normal in every way.  She told me,

I believe attitude has everything to do with the way you live your life, so I certainly think having a positive attitude makes all the difference.

Rachel is entered into Maurices Main Street Model Search 2012.  Should she receive enough votes, she advances to a second round.  The prizes associated with the contest are (1) modeling for Maurices, and (2) earning a corporate donation for a favorite charity.  In this case, Rachel’s charity is Alexa’s Hope, dedicated to education for the need to support organ transplants.  Alexa’s Hope was founded by a woman whose daughter died while waiting for a transplant.

You can read more and vote for Rachel by clicking on this link, or by clicking on the following image.

Please vote for Rachel, again and again.  It’s for a good cause.

Debit and credit – – David Albrecht

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Sooner or later, every blogger must ponder this question:  To toot or not to toot?

This blog post is about the role of posting credentials for those who professionally engage in social media.  It is not about being (or not being) awesome.

One of the social media world’s top bloggers–Mark Schaefer–wrote about it yesterday in, “Social Proof and Your Battle for Credibility.”

I promote blogging as an essential activity for cpa firms, professors and students. The sharing of ideas (i.e., content) through the written word is a terrific way of reaching clients, providing evidence of expertise, brand building, and initiating dialogue.  These are important ingredients in the building up and exercise of influence.

And blog promotion is an essential part of blogging, because if a blog has no readers, then it matters not if it exists.

In the quest for new readers, whether a blog writer is searching for more readers or the right readers, receiving critical acclaim is an effective means of establishing credibility.  Critical acclaim is widely used in various media outlets to attract readers, viewers or listeners.  Likewise, it can be used as a reason for why potential readers should visit and start reading a blog.

Mark Schaefer says,

When establishing online influence, social proof matters … even more than real achievement.

The Summa attracts readers from at least 150 countries each month.

I agree.  Social proof can be exhibited by posting badges like Klout scores, number of readers/followers and blog awards.  And I toot my own horn in the right margin of The Summa (number of accumulated page reads and a world map from where my readers long on).  Also, I once wrote a blog post about being named to the Accounting Today 2011 list of Top 100 Most Influential People in Accounting.  And The Summa has been mentioned on many Best Accounting Blogs lists.

However, yesterday Schaefer announced that for the time being he is removing his badges.  This decision results mostly from his acknowledgement that his ego finds such badges to be distracting, and contributes to him getting off message.

Good point.

I enjoy having readers and would like more.  But in the final analysis, I hope someday to be known for influencing the accounting world to be a better place.

If you write an accounting blog, I endorse your use of “badges.”  And if you read accounting blogs, I hope you understand that they serve a valid purpose other than ego stroking.

Debit and credit – – David Albrecht

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Al Lewis, Dow Jones Newswire columnist (Al’s Emporium) and blogger (Tell It to Al), poses an interesting notion to the Sunday edition of the online Wall Street Journal.  He says that the easiest way to understand Wall Street scandals and implosions is to attribute them to the work of psychopaths, or psychos   He might have a good idea.

Psychos on Wall Street”  is a good read, in part because Lewis shines the light on one of my favorite people, Sam Antar.  Sam’s cousin, Eddie Antar, had a company called Crazy Eddie’s.  Crazy Eddie’s sold electronics in the Northeast.  Eddie starred in some over-the-top televised commercials. Together, Sam and Eddie orchestrated a series of frauds, victimizing insurance companies, suppliers and eventually stockholders.  Their securities fraud was the largest of the 1980s.

Back to Sam in a minute.  First, a discussion of psychopathy.  A diagnosis of psychopathy is, as I understand it, more of a judgment call than a scientific test.  If a person exhibits a sufficient number of symptoms, then he/she can be diagnosed as a psychopath.  These symptoms include:  disregard for the rights of others, a total lack of empathy and remorse, selfishness, insensitivity, dishonesty, aggressiveness, impulsiveness, irresponsibility, and pleasure seeking.   A psychopath is not controlled by a sense of right or wrong, and frequently preys on fellow humans.

I’ve looked over several checklists used in psychopath identification, and I’m sure that I’ve worked with at least one psychopath in most places I’ve been employed as a professor.  In business, they frequently end up in charge.  This is not to say that every business boss is a psychopath, but probably a lot are.

Lewis cites Sherree DeCovny (a former investment broker) as saying that at least 10% of the professionals on Wall Street are psychopaths.  This is where my friend Sam Antar re-enters this story.

Lewis quotes Sam Antar as admitting he is a psychopath. And Sam Antar estimates that 80% of the professionals on Wall Street are psycho.  “It’s a bunch of crooks dealing with other crooks.”

I’ve had enough conversations with Sam to know that he probably was (and still is) a psychopath.  I’ll never forget his description of the mindset of someone committing fraud.  Other people are marks to be exploited.  Good people, he calls them, with a sense of right and wrong.  Having no such sense himself, when he was younger he had no qualms about stealing from them. Stealing from them was fun.  Sam viewed good people as deserving of being stolen from.

For some unknown reason, Sam says he respects me.  He thinks I have the visibility to warn other good people (and my students) to always remain vigilant of people like him. Being wary of others is the key to protecting yourself.  And once you spot a fraudster (aka psycho), do whatever is needed to eliminate the threat.

Yes, I think Wall Street is populated by psychopaths.  And like at the Bates hotel, there is always a vacancy for the next victim.

Debit and credit – – David Albrecht

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I am both proud and pleased to announce that I have accepted a position as professor of accounting at the George Dean Johnson, Jr., College of Business and Economics at the University of South Carolina Upstate, commencing with the 2012-2013 school year.


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Kyle Dodwell is a young CPA with a masters degree in accounting from Truman State University.  He recently created and published a humorous video blog, or vlog, at the direction of his bosses at Brown Smith Wallace (BSW) CPAs in St. Louis.  The vlog is intended to draw visitors to the BSW web site, where it is hoped they can be converted into clients.

I talked with Kyle for about a half hour, and found him to be a likable and interesting young CPA.  And he has humor, unlike his video persona.  In the following video, Kyle plays the stereotypical CPA as a dull, bored accountant in a never-changing world.  If you watch it when you’re in a good mood, you’ll find it funny.

Right now, Kyle is immersed in busy season.  If time spent on some task isn’t billable, then it doesn’t matter.  Consequently, there won’t be a new video blog post until after busy season. Kyle is ready, though, for when he receives the eventual go-ahead.

Kyle enjoyed the experience.  He wrote the script, filmed it, edited it, and then spent much more time re-editing it.  Seven to eight hours in total.

Kyle doesn’t use social media in his job.  I asked him if he reads any of the popular accounting blogs, but he says no.  He only receives a daily news e-mail from the AICPA.

He adds, “The attention the video received was a surprise to me.”

The attention doesn’t surprise me.  Accountants are starved for work-related humor.  Moreover, professional social media usage is struggling to get off the ground.  If this is played correctly, Dodwell could soon be attracting several thousands of viewers to his vlogs, instead of the few hundred for his first effort.

I also talked with Michael Bowlan, director of marketing for BSW.  Bowlan has long wanted the firm to do more with social media, and has been pushing the idea of a firm blog for a couple of years.  Bowlan says he came up with idea for this particular external vlog after noticing some of Dodwell’s work.

He originally did a series of recruiting videos (by employees). He submitted three, and they were very funny. Not what we were expecting. Then at the holiday party, the idea was for Kyle to do a video as a lead in to the managing partner’s comments. And eveyrone was rolling on the floor. Then the idea was to create a new video to attract people to view the content on the firm’s web site.

Bowlan also said,

… the relevant partners and I select the topic and frame the message points for Kyle; however, he has such a unique talent that we let him craft his approach and just review his video for accuracy.

Then I asked Bowlan if there are plans for more.

He has a day job to do. The thought right now is for him to do more on a monthly basis. They might not all be tax topics. To engage people, to get people to do our name.

I hope BSW lets Kyle Dodwell create additional videos on a more frequent and regular basis.

My reaction to all of this?  Dodson has done a good job with this assignment.  I encourage the firm’s principals to ponder the value to be gained from investing in social media and blogging.

Debit and credit – – David Albrecht

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For my readers who have an interest in taxes, today’s post revolves around two facts:

  1. Theodor Seuss Geisel, aka Dr. Seuss, lived from March 2, 1904 to September 24, 1991.
  2. Kelly Phillips Erb, aka TaxGirl, is one of my favorite bloggers.

Throw them together into a mixing bowl, and out comes, “I Do Not Like Them, IRS: My Ode to Dr. Seuss.

Geisel, better known as Dr. Seuss, is well known for writing children’s books.  The most popular, Green Eggs and Ham, contains only 50 words.  Each is used several times to craft an entertaining book..  Green Eggs and Ham has inspired many to write poems that mimic Seuss’s poetic style.

I missed Dr. Seuss books when I was growing up.  I was already 11 when Green Eggs and Ham was published, and I was into reading science fiction novels and Time magazine by then.  When my own kids needed reading material, we fed them Golden Books, Berenstain Bears and Uncle Arthur’s Bible Stories. Never-the-less, who doesn’t like Green Eggs and Ham?  Even Sam likes them.

Kelly Phillips Erb, the TaxGirl, is the blogger’s blogger.  She writes with impeccable style and unquestionable authority on taxes.  I read her mostly to pick up blogging tips.  As an accounting professor I like also to stay informed about taxes.

Yesterday, she commemorated the birth date of Dr. Seuss.  She graciously gave me permission to reprint her poem:

I Do Not Like Them, IRS. 

That IRS, That IRS.
I do not like that IRS!

Do you like tax and stress?
I do not like them, IRS. I do not like tax and stress.

Would you like them here or there?
I would not like them here or there. I would not like them anywhere.
I do not like tax and stress. I do not like them, IRS.

Would you like them when upset?
Would you like them while in debt?

I do not like them when upset. I do not like them when in debt.
I do not like them here or there. I do not like them anywhere.
I do not like tax and stress. I do not like them, IRS.

Would you meet them for a chat?
Would you roll out a welcome mat?

Not for a chat. No welcome mat.
Not when upset. Not when in debt.

Thank you, TaxGirl.

Debit and credit – – David

David Albrecht

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This tears me up, it absolutely rips me.   Ernst & Young lost extremely sensitive data while auditing Regions Bank (15th largsst). I consider this a significant data breach.

Unless you subscribe to the Birmingham News, you probably missed this.   Russell Hubbard reports on January 31, 2012, that, “Regions Says Employee 401k Data Lost When Auditor Ernst & Young Mailed Flash Drive and Code Key Together.”  Info Security Magazine provides additional information.

Ernst & Young mailed the data from one of its offices to another.  The envelope contained an encypted flash drive with employee personal identity and 401K data, and a sheet of paper containing the decryption key.  During transit the envelope was ripped open.  At the destination, the flash drive was gone, but the decryption key remained.

There are three documents that ProfAlbrecht is trying to obtain:  (1) letter from Ernst & Young to Regions Bank explaining the incident, (2) letter from Regions Bank to its to its employees explaining the incident, (3) letter from Ernst & Young to employees.

Hubbard reports that Ernst & Young regrets any inconvenience and concern that Regions employees might experience.   Both Hubbard and Info Security Magazine quote one of the Ernst & Young letters as saying, “… we deeply regret that this incident occurred,”

EY regrets that the incident’s consequences but not having caused the incident.  I strongly dislike such non-apologetic apologies.

Regions has a reputation for lock-down tight data security.  Unfortunately, Ernst & Young doesn’t.

I wonder if Ernst & Young will get fired over this incident.

I’ll report more on this in the future.

Debit and credit – – David

David Albrecht

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