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Our Responsibility to the Public Interest

Mary Ellen Olivero, PhD, CPA

Joanne S. Barry’s Publisher’s Column, “Serving the Public Interest,” (The CPA Journal, February 2010) was excellent. As I read it, I began to think how we try to underscore public interest commitment in teaching students the responsibilities of auditors. I always pause when we discuss the topic in order to comment that auditors are not the only ones who are concerned about the public interest. For instance, those who write about wonderful places for tourists are expected to not be promoting a location where the local chamber of commerce has provided an appealing stipend in return for an “independent” story.

Barry recommends participating in local budgets. Wouldn't a valuable pro bono activity for CPAs be to review budgets for all types of entities that provide services, especially those supported by taxes or contributions from individuals and businesses? I am thinking of public school systems and all types of charities that have societal or community missions. The AICPA's Statement of Position for not-for-profit entities discusses proper allocation of costs, which was initiated by the awareness that charities were sponsoring elegant parties for benefactors—taking 10 minutes after the banquet to describe their program—and then these charities were allocating the total cost of the banquet at the Waldorf or the Plaza as a program cost.

In reading SEC administrative hearings of PCAOB (Public Company Accounting Oversight Board) enforcement cases, I am stunned at the extent to which the responsibility to the public interest has been set aside. I think articles by practitioners who provide volunteer services in assessing not-for-profit entities' budgets would be very interesting. Through giving close attention in helping such entities, auditors would be enhancing awareness of the value of the profession's responsibilities for the public interest.

Beyond the budget, attention to internal controls of not-for-profits is also needed. For example, when controls are not monitored, it is easy for expenditures to be misclassified, which might serve to cover up an unjustified use of funds. A charity might “thank” a benefactor with an invitation to attend a fictitious, all-expenses-paid conference in London or Paris. The contributor gets back 80% of the donation as a vacation. Such sheltering of money beyond the actual contribution is a practice whose elimination is in the public interest.

Giving attention to the public interest may be as valuable as attempting to improve internal controls in the not-for-profit world.

Mary Ellen Olivero, PhD, CPA. Pace University New York, N.Y.

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