Abraham Briloff passed away recently at the age of 96. Briloff will be remembered for his tart, but penetratingly accurate analysis of the garbage that sometimes masquerades as financial statements. Those who love accounting and value truth in corporate annual reports will greatly miss him.

Briloff wrote most of his essays for Barron's. In these papers, he would show how a particular company misused accounting, often within the tangled web of ambiguities we call generally acceptable accounting principles. Because the ultimate problem was GAAP, he sometimes would refer to them as cleverly rigged accounting ploys, which induces an apt acronym.

The stock market paid attention to the writings of Professor Briloff. His words would affect a stock price significantly, both in its negative direction and in its magnitude, often falling around 10 percent the day of publication. No other author has had such influence on corporate stock prices.

Abe Briloff also wrote a number of books, including Unaccountable Accounting (1972), More Debits Than Credits (1975), and The Truth about Corporate Accounting (1981). These books often expanded his original analysis in Barron's, but allowed him to provide more detail in each case, to supply more corporate examples of misdeeds, and to synthesize the findings across the individual specimens. In these books, Abe unmasked the world of accounting and revealed to the public the ugly realities under the surface.

He ended each text with "Quo vadis?" -- "Where is the profession headed?" It was not so much an attempt to pierce the future, but a plea to the profession to confess its sins and promise to reform. What would it take to put a fire under auditors and improve the profession?

INSPIRING, ENERGIZING

I first met Briloff at a conference of accounting professors in Hartford, Conn., in 1978. He had agreed to a debate with members of the then-Big Eight, only to discover that none of the accounting firms had the guts to stand on the same platform as Abe. While he talked about accounting miscues, he also wondered why the Big Eight refused to dialogue. If he was wrong, why couldn't they explain in public his errors? But if he was right, why couldn't they admit it and reform?

I went to an accounting conference in New York sponsored by Willkie Farr & Gallagher shortly after Enron and WorldCom imploded. I ran into Abe and Liz MacDonald (then with The Wall Street Journal, today at Fox News). The three of us sat together during the conference and had a lively discussion on current events and commenting on the speakers' presentations. I no longer remember the specific discussion, but I do recall leaving the conference inspired and energized because of this day-long sidebar. Enron and WorldCom proved that the war for accounting truth required many, many future battles; Abraham Briloff furnished a strategic plan to win that war.

I called Abe a couple of years ago to see how he was doing. He said he was "despairing but not despondent" about the profession. He always had the hope that someday ethics would become more than a catchphrase for the accounting profession.

The investment world, the accounting profession and even government regulators have not benefited much from Briloff because they have ignored his warnings. But they have paid a huge price for shunning his admonitions. The accounting meltdown in 2001-2003 did not have to happen, nor the banking industry's shenanigans in 2008. Indeed, we can expect more disasters in the future if we continue to abuse GAAP, and as long as auditors favor managers over investors.

Those who heed Briloff's words can protect themselves and their own investments. As he once said to me, "The problems laid out [in Unaccountable Accounting and other writings] are being replicated now. Matters are disintegrating further; the dollar amounts are much higher; and the acceleration to the bottom is growing exponentially. The tragedy I wrote about then is intensified today."

I have been inspired by Briloff's writings and encouraged further whenever he wrote me or we talked on the phone. I shall greatly miss his wisdom, his ideals, his appeal for real professional ethics, and his clarion call for accounting truth.

J. Edward Ketz is an associate professor of accounting at the Pennsylvania State University. The opinions expressed are his own, and not necessarily those of Penn State.

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