Thursday, December 20, 2007


Dear Colleagues

A big part of the Tr-Ac-Net agenda is to get accounting sorted out so that it does what it needs to do.

Accounting is not meant to be a system that enables the corporate world, and indeed any organization, including government, to hide behind a set of numbers that are legally right but make no sense and certainly do not portray a "true and fair" view of the financial situation of the organization.

At their core, economics, and accounting are quite simple subjects. But modern law now makes a mockery of accounting principles ... and complex legal constructs aim to defeat the basic gravity of economics. Many will argue that it works, and that there has been the longest period of economic progress in the United States in history over the past two decades. This is a myth and it will be debunked in due course.

I will argue that there has been incompetent accounting in recent times, and corporate leadership that has embraced legal smoke and mirrors accounting with open arms. As someone who became a Chartered Accountant in the UK in 1965, I am appalled at the failure of the accountancy profession around the world to demand better of its members ... but as one of the senior people in the accountancy world told me almost 20 years ago ... accountancy is no longer a profession, it is a business.

One of the changes that is needed in the accountancy world is a change in focus from satisfying the private needs of an organization to satisfying the the broader needs of the society. The title of Certified Public Accountant (CPA) is misleading, because the CPA has little or no role in ensuring that the public is correctly informed about the financial situation and performance of an organization ... merely to report privately according to legal rules.

When the question: "Accountability to whom?" is asked ... there is nothing that requires that it is the "public" that gets the information. The nearest that the public gets is when a member of the public becomes a stockholder in a public company, at which point this stockholder is entitled to a set of information. But the public as a whole is never entitled to much of anything from the world's major economic entities ... and any potential for disaster is efficiently hidden.

There is a lot of work to do to get accounting so that it does the work that needs to be done. Fortunately modern technology can be an enormous help.


Peter Burgess