June 2002

Annual Election Meeting Speakers Call on Society Members to Help Restore Trust

Accountants should not allow recent accounting scandals to fade from public attention without leading the American financial system toward reform through ethics and expertise, a renown accounting professor told members of the New York State Society of CPAs during its Annual Election Meeting and Dinner.

Baruch College President Ned Regan said in a speech to hundreds of CPAs on May 9 that reform must come from the individual up and not be reliant on government intervention as in the past, otherwise the system would be in danger of continuing the cycle of episodic crises offset by a return to business-as-usual.

“Is this a one-shot deal: Enron, Xerox, Global Crossing?” Regan said. “It’s all a big story now but it’s slowly fading and by next fall, the elections will be on and the press elsewhere…This story should not go away.”

The recent financial reporting scandals were in no danger of disappearing from the spotlight during the 105th annual meeting as Regan, former Society President Nancy Newman-Limata and President Jo Ann Golden pointed to cases like Enron, Global Crossing and Xerox as defining events of the last year that continue to profoundly affect the accounting profession. Newman-Limata parted office calling the recent crisis a “catalyst for change,” while Golden said the Society would have a “tremendous impact” on regaining the public trust in the coming year. All three speakers connected the restoration of trust in the profession to personal action on behalf of CPAs individually and the Society as a whole.

“The American corporate economy is the greatest engine of wealth and prosperity in the history of the world,” Regan said. “But its greatness resides, as so many successful economic factors do, in a simple exchange of trust. The corporate economy works because the corporation…protects the individuals running it from liability of all kinds in the conduct of their business. In exchange, the equity market expects that the money that goes into the corporation will be used as it has been promised to be used, and will be properly accounted for at the end of the day.”

Regan, a former New York state comptroller, chairman of the Municipal Assistance Corporation for New York City, and trustee of the Financial Accounting Foundation, said corporations have been under tremendous pressure for years to grow profits for the half of the American population that invests. Such investment dynamics make it imperative to reform stock-option compensation for CEOs, to make management liable for the veracity of financial reports, and to maintain the transparency of those financial reports.

Regan said the lack of transparency cost Enron’s shareholders $100 billion, while other “auditing misdeeds” in the “boom years of the 1990s” resulted in an estimated $400 billion loss. The cost in the end was $4 trillion in market share that went “down the tubes” when the bubble burst, Regan said.

“U.S. financial markets and investor confidence absolutely depend on information about public companies that is accurate, information that is transparent, information that is consistent,” he said.

“Ethics and integrity aren’t just pretty notions: they are the absolute, rock-solid foundation of the American economy,” Regan said. “Our lives depend on them; our prosperity and our health as a civilization depend on them.”

Golden Year

During her first address as president, Golden said she had become acutely aware of the responsibility she would face as the head of the Society while the nation as a whole scrutinizes the profession.

“A few months ago, I recall discussing those Enron issues and my impending presidency with a colleague,” she said. “He said to me, ‘I certainly don’t envy you. What an awful time to be the head of a CPA society.’”

Golden told her colleague that she actually saw the office as an incredible opportunity because “crisis always seems to bring about an outcry for change.”

“I believe the state Society can have a tremendous impact, indeed, (it) can take a true leadership role in…engineering whatever change may be needed to ensure the continued public trust in…the CPA,” she said.

Golden said she believed in her role as an advocate for the membership, remarking that she had already participated in meetings with state legislators working on laws in response to Enron. But she called on members to individually express their opinions to the Society’s leadership to guarantee that the Society is representing them, and to speak with legislators directly about the strengths and weaknesses they see in the profession and where they see the need for change.

“It is time for each of us to pause, reflect, and thoroughly examine the way in which we each practice,” she said.

Golden also encouraged members to become active in one of the Society’s 68 committees and 17 local chapters.

Regular Business

Outgoing Society President Newman-Limata presided over the meeting, which included presentation of awards to CPAs and others for distinguished service, education, journalism and achievement on the uniform exam.

Newman-Limata also announced the election of the Board of Directors for the fiscal year that began on June 1.