In high school, our varsity football coach would routinely present opponents' game films to the math department, who would calculate probabilities on the types of plays that the teams would run in certain situations. In one game, the plan backfired like a baked potato wedged in an exhaust pipe as we found ourselves on the short end of a four-touchdown shellacking - on Homecoming Weekend. When asked afterwards what went wrong, the coach shrugged sheepishly, and replied, "On paper it looked like it would work."Fast forward to last month, when the Treasury's Advisory Committee on the Auditing Profession approved and adopted a final report with a series of cogent recommendations on how to improve the sustainability of the audit profession.
At least on paper.
The recommendations focused on three specific areas: improving accounting education and strengthening human capital; enhancing auditing firm governance, transparency, responsibility, communications and audit quality; and increasing audit market competition and auditor choice.
After poring over the bullet points, the suggestions appeared to me, at least, to be more common sense than strategies that could only be divined through, say, a 30-year career in auditing.
But as I've said in this space several times before, this is not your father's audit firm. The profession's landscape has changed and will continue to evolve - and not just as a result of the past accounting scandals or tighter regulations. The demographics are different, as are career goals and challenges.
Which is no doubt why the committee dedicated a sizeable portion of the report to accounting education and recruitment, including a push to gain more minority representation. Again, on paper it sounds like a no-brainer, but if statistics are any indication, some progress has been made, but there's still a ways to go.
The committee also called for a study of the future of accounting education to deal with the changes in financial reporting and auditing. The key word here in my opinion is "study." "Study" in Washington parlance is a euphemism for "time," and sadly, with the inevitability of convergence with International Reporting Financial Standards, the profession doesn't have a lot of that in reserve.
The U.S. college accounting curriculum has to begin preparing to train students in IFRS, and recent studies have shown that shockingly few schools have taken that initiative. If the CPA credential is going to compete seriously on a global level in a post-convergence world, work has to begin now.
That segues into a bigger problem - ensuring an adequate supply of accounting faculty, particularly Ph.Ds. No matter how that's accomplished, it's an inarguable reality that it must be addressed.
On paper, the recommendations to hone the audit profession seem sound. But as my coach and our team painfully discovered, everyone has a plan on paper until they get hit.
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