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Cp As: Who's Watching The Watchers?


Readers Report

CPAs: WHO'S WATCHING THE WATCHERS?

Thanks for a substantial, well-documented, and useful article--"Who can you trust?" (Cover Story, Oct. 5). You offer a range of specific, down-to-earth suggestions, and I would hope to see some of them materialize.

Two additional proposals:1. Fees to investment bankers for arranging unions should be paid over time, maybe five years or more after the acquisition has taken place, and be linked to real performance over that period.

2. Analysts, investment bankers, and mergers-and-acquisitions brokerS should complement their due-diligence process with businesS analysis systems that take into account the important threats and assets that are not reflected in accounting. Such systems, well-tested, exist.

Hans V.A. Johnsson

Old Greenwich, Conn.

The certified public accountants who audit these rogue corporations know exactly what is going on. The supposedly unbiased and independent CPAs have made a conscious decision to put their stamp of approval on questionable and devious accounting practices. CPAs are hired by--paid by--the corporations they audit. CPA firms work very hard to get and keep their audit clients. There is a terrible tug of war in every CPA firm between requiring a client to be forthright and truthful in their financial reports and keeping the client and the lucrative fees. It appears to me that too often money wins over honesty.

Generally accepted accounting principles (GAAP) may not have specific rules for dealing with today's gigantic accounting shenanigans, but one GAAP requirement, apparently the hardest of all to deal with, will never change: to tell the truth, the whole truth, and nothing but the truth. Your last sentence--"What we need is more integrity--integrity in managers and integrity in their numbers"--is incomplete. What we need also is integrity in their CPAs.

Bernard B. Kamoroff, CPA

Willits, Calif.

Your article does an excellent job of discussing the incentive faced by executives, auditors, and analysts as they prepare or evaluate financial statements. One group, though, deserves further attention--audit committee members. The article calls for more audit committees consisting of "truly independent business people." What we really need are more committees consisting of "truly independent accounting and auditing experts."

Unlike many other board functions, the audit committee work is often technical, for it deals with accounting and auditing standards. You wouldn't let a non-attorney oversee legal compliance or a non-physician oversee medical issues, so why do we often have non-accountants overseeing the financial reporting?

Many boards try to turn good directors into good audit committee members. But without technical training in accounting and auditing, this can be difficult to accomplish. I would prefer to see more boards add accounting and auditing experts to the audit committee and then help these individuals to become good all-around directors.

Dana R. Hermanson

Director of Research

Corporate Governance Center

Kennesaw State University

Kennesaw, Ga.Return to top

KAPLAN'S GMAT PROGRAM: FOCUSED AND SUCCESSFUL

Your "Best business schools" issue (Cover Story, Oct. 19) promoted an evaluation of GMAT prep courses. We wish you had actually done so. We invited your reporter to come into our classes to see for himself why Kaplan is the largest and fastest-growing GMAT program, with triple the students of any competitor.

He would have found a focused program that respects students' time and intelligence, with highly engaging teachers and lots of opportunities to practice in the new computer test format. Statistically, getting into business school is harder than it has ever been. Kaplan has been so successful because we help busy students get the scores and advice they need to overcome the high hurdle that business school admission presents.

Maybe some of this didn't make it into the article because our GMAT software has a 90% market share, which doesn't leave much room for the GMAT software BUSINESS WEEK co-brands with one of our competitors. That somehow didn't get disclosed.

Jonathan N. Grayer

Chief Executive

Kaplan Educational Centers

New York

Editors' note: We regret that the story did not mention that BUSINESS WEEK and Princeton Review have a co-branding and marketing relationship. But our story was based on what more than 2,000 recent graduates at 61 top B-schools told us in a survey, plus more than 20 additional interviews. And we did send a reporter to visit a Kaplan class.Return to top


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