Institute is anything but 'transparent'
I figure that I pretty much have to put up with all the lip service put forth in writings by our national trade association, the American Institute of CPAs, in its feeble attempt to clean up its act.
But having to read their musings in my state's society publication is a bit much. The discussion is now peer review, and how we have to be more transparent.
We all need this transparency just like those other far-reaching ideas like CPA2(monkey)Biz, Cognitor and Web(mis)Trust. I don't buy it.
As once-proud members of our state society and national trade organization, we have subjected ourselves to five peer reviews and are about to undertake a sixth.
Let me tell you a little bit about a couple of them.
The first one was uneventful. During the second one, we discovered that my tax partner didn't seem to pay attention to the term "cash" versus "accrual" in the compilation letter. That one was an easy fix. It also demonstrated that no matter who the reviewer was (and we imported a good one), it really depended on how much that person knew or personally worked on. Last time I checked, there's no test of accounting knowledge. The reviewer missed about one-third of the workpapers, all dedicated to front-end planning, by asking the question: "Where's the evidence that there was any front-end planning?"
Also passed over was the audit of the inter-period tax allocations resulting from having different reporting and tax year-ends (OK, I asked and the response was: "I don't do that work in my office"). We eventually received a clean opinion.
I was proud of that opinion letter, so I sent a copy of it to all of my business clients, bankers and other potential referral sources. The number of comments received from all of those mailings? None.
The next three peer reviews have resulted in a couple of nits being picked with a new peer reviewer. This person asked good questions and even had some good ideas. I won't go so far as to say that I got my money's worth, but at least it's bearable. Same results as before - a clean opinion. In one case, I had missed that clever addition to the audit opinion letter that found its way into the first paragraph, and had to spend way too much time developing an acceptable response why we won't miss that phrase again. I should have found it, but no one reads the opinion letter anyway.
I again sent out copies of the clean opinion letter the next couple of times, along with a cover letter describing the process and our commitment of accountability to our clients and the business community. Again, the number of comments received to date? None.
The last time I simply filed the opinion letter away where it remains today.
So I really don't care if they post on the Internet the peer review letter, the letter of comments and my response, my shoe size or the number of days per year I play golf. It's my experience that no one's going to care much anyway. In my opinion, the benefits being touted by our national trade organization are far overstated. One of my personal favorites is: "Members who have positive peer review results are likely to be rewarded in the marketplace." I'd like to see a study that supports the term "likely."
The study was probably conducted by the same firm that said that "Cognitor" would pass.
Let's review transparency. Prior to the past several years, I don't recall reading about any national firms or their individual partners being expelled (except for Andersen, which I think withdrew) after hearing about one or a multitude of audit failures. There have certainly been plenty of audit failures to find a couple laying around. Of course, these hearings were held in secret, although they state: "Our profession has a long history of commitment to the public interest."
I guess it's just another form of transparency.
When you have a "Final Four" firm unable to understand that its independence just might be impaired upon entering into a commission arrangement with an audit client, or paying an audit committee member of an audit client a hefty sum unrelated to that client, we have transparency problems. But it's not about the current peer review proposals.
I know that it's not reasonable to completely divorce our state society from our national trade organization, or the person, named as one of the 50 worst managers in the country as determined by Business Week in 2003, running it.
But we don't have to embrace them either.
Thomas N. Tone
Tone, Walling & Kissinger CPAs
Westlake Village, Calif.
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