Ezzell, a partner with Deloitte & Touche, sees himself as a "restoration chairman." His challenge: to rebuild the self esteem of his organization's 340,000 members and repair the profession's reputation. He recently met with BusinessWeek Associate Editor Nanette Byrnes in his AICPA office to discuss some of the issues the industry faces. Here are edited excerpts from that conversation:
Q: What are the biggest reputation problems facing the AICPA and CPAs in general?
A: Clearly, we acknowledge that some instances that have come up have not been our best day as a profession. There have been mistakes made in our part of the process, but there are also a lot of other issues.
Some of these [blowups] may be accounting errors, or, in some cases, people may have thought it was good accounting and been wrong. In some cases, we might have missed something. In some cases it might have been concealed from us, but our role is to be testing what management has done. We test, we evaluate, we make sure they have adhered to the rules.
Q: What are the misperceptions you seek to correct?
A: It's easy to say the auditors caused a company to fail. We never caused a company to fail -- bad business causes a company to fail. The auditor is not necessarily the business conscience for America.
Q: Given all that has happened, shouldn't auditing become more investigative?
A: We have been working hard to have deeper skepticism. That's partly achieved by doing specific procedures. You must evaluate where fraud could occur when you're looking at [a company's financial] controls. You must evaluate the degree to which management has the ability to override a key control.
The other part of [encouraging skepticism is a matter of] tone -- making people aware of the possibility of fraud. I'm an auditor. I've found fraud. But most auditors -- not unlike a policeman who may go an entire career and never use his service revolver in a difficult situation -- may go through an entire career and never encounter a fraudulent situation.
Q: You've made the point to me that it's not just auditors who must increase their skepticism, that board members must also.
A: As an audit partner, I can't tell you how many times I've wished that an audit committee was more engaged. At the end of every meeting or conversation I ever had with an audit-committee member -- no matter how many times I may have met with him before -- I gave him my business card again and said, "If there's anything that comes up and something doesn't make sense, call me." Never has anyone called.
Q: The Sarbanes-Oxley law is the most comprehensive overhaul of the auditing role since the 1930s. What do you think of it?
A: Overall, we supported most of the concepts that are in there. On some of the details we would have come out differently. We now have a five-member Public Company Accounting Oversight Board -- two of whom are CPAs, but of the CPAs they happened to choose, one is really an attorney. He doesn't have any current audit experience.
Charley Niemeier [who has just been named acting chair of the Oversight Board] is a great CPA, but he spent the last years at the SEC seeing the worst there is to see [as chief accountant of the SEC's enforcement division]. He hasn't seen a good audit in a while. I think they would serve themselves better by having some more members with current audit experience. This concept that everybody needs to be pure means we get people who don't know anything about what they're trying to regulate, or not enough about it.
Q: Do you think you picked your battles over regulation in the last year wisely? In retrospect, should you have perhaps been less critical of John Biggs when he was a candidate to head the new professional-oversight board? [The controversy over Biggs's failure to be nominated and over the subsequent nomination of William Webster contributed to Harvey Pitt's resignation as chief of the SEC.]
A: Everyone is speculating on whether John Biggs would or would not have been the best person. I will tell you this, I find it so hard to imagine that there's only one human on the face of this earth who could actually do that job and that's John Biggs.
He may be very qualified, but I've got to believe there's more than one person out there. I'm at a loss to understand, just as a citizen of this country, why everyone has just glommed onto that name like it's the second coming or something. The thing I'd be looking for is some hard-charging people who would be willing to spend 60 hours a week [on the job]. This is not some cushy board seat. This is something that doesn't exist, doesn't have any employees, and needs to get going in the next four months.
Q: Is there a split among CPAs themselves, among your members internally, a feeling that the big firms have tarnished the whole profession?
A: Among CPAs in firms that don't do public-company audits there has been a real sense of concern that the firms that do public-company audits, that individuals in those firms, have not lived up to the standards of this profession. It has been very visible, and it hurts. It hurts us all. Integrity, objectivity, independence. We all have to abide by that.
Q: Separately, do you support the movement toward unified international accounting standards instead of the current country-by-country rule-making?
A: It's absolutely time. We have a global economy. We can think of our stock market as being the biggest, [as having] the greatest history, the most vibrant, and all that. And that's good, and it feels good. But the Europeans are saying the same thing now. Companies and individuals are moving capital across national borders, and we have to have the transparency to protect the public.
Q: Was it a mistake for the International Accounting Standards Board (FASB) to pick as its first topic accounting for stock options, a highly contentious issue here in the U.S.?
A: I hope that politics will step aside and the appropriate bodies, the FASB [here in the U.S.] and international standard-setters, will work that issue through. I don't think it's something that should be politicized. It has been [politicized] in the U.S. in the past.
I don't hold a torch for any particular answer, I think the important thing is that we get to an answer. Even if we can't resolve that one, I think necessity itself will push us beyond that to the next issue. The European Union is moving by 2005 to international standards. If they don't slow down, we're going to have a big block of countries that are going to be on international standards by 2005.
Q: Will 2003 be an easier year for auditors?
A: We all -- my profession, your profession, investment analysts -- we all have the very important responsibility to do the next things we do very well and get them right. We all bear responsibility not to unnecessarily throw gasoline onto a fire. Otherwise we run the risk of exacerbating rather than helping the problem.