Hobbled by laryngitis, but otherwise appearing healthy and invigorated, former Andersen chief Joseph Berardino spoke to a gathering of managing partners from many small and mid-sized firms this week, to lay out his views on what went wrong with the profession and how it can be fixed.


In general, Berardino was warmly received, but it was a little more than ironic that the former head of Andersen was paid (quite a tidy sum I'm told) to help CPAs figure out a way to get out of the mess that his firm helped put them in today.


To be fair, much of what Berardino said makes a good deal of sense. He thinks the profession needs to move towards a principles-based system for conducting audits, throw out the pass/fail grading system, look more carefully at key risks of a business and move toward enterprise risk management in order to help prevent future business failures.


But what stuck in my craw is that while Berardino said he came before the gathering "in humility, humbled by the loss of my firm" he never really came out and said, "I'm sorry" or take any real credit - as a longtime Andersen employee - for the profession's precipitous slide.


Most observers agree that Enron's accounting shenanigans had to have been, if not sanctioned by Andersen, then at least allowed to slip past as a calculated risk. And although Berardino was only at the top for a short time, he must have known was going on.


Unlike the small firm owners who may be battling for their very livelihoods once the true effects of Sarbanes-Oxley become known, Berardino is a wealthy man, and stepping down from Andersen didn't mean he had to scramble to find work.


Instead, following his resignation, he went on a fact-finding tour, meeting with institutional investors, heads of companies, small and regional accounting firms to ostensibly learn what went wrong, a self-appointed goodwill ambassador of sorts.


His conclusions: the democratization of the stock market, linking executive pay to performance (leading to manipulative accounting), the increased interest of the media on earnings, the creation of hedge funds and growth of short-selling, and the evolution of investors becoming more wary of conflicts of interest - these were to blame for the sorry state corporate America, and the accounting profession, is in today.


Well, he didn't say that exactly. What he said was that these trends "redefined business." Well if the accountants were doing what they were supposed to be doing, they would have kept the public interest foremost in their minds and made sure that safeguards were in place so that greedy companies, headline seeking newspapers, and ultra-risky investment vehicles would not have the freedom to run amuck.


A recurring theme at the State of the Profession conference is that accountants need to make the sober judgments that others aren't willing to make and jump ahead of the curve. Even Berardino remarked that accountants needed to be on the offensive, because if you're not the lead dog, "the view never changes."

What Berardino didn't explain is why Andersen, once the gold standard of accounting firms, apparently never figured this out.

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