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Truth and Accuracy—in Words and Numbers

Joanne S. Barry

Journalism is in trouble. In the past five years, more than 39,800 newspaper jobs have been eliminated in the United States, according to the Paper Cuts blog (http://newspaperlayoffs.com/), a website that has kept track of the shrinking newspaper industry since 2007. Already weakened by taking on huge amounts of debt in a drive for higher profit margins and struggling against an emerging digital medium—where according to a Federal Communications Commission (FCC) report, “The Information Needs of Communities,” digital ad sales bring in only four cents out of every print advertising dollar—newspapers were devastated when the recession hit, leaving the reporters who work for them jobless and the coverage that the public depends upon them to provide absent.

I've been struck more than a few times by some of the similarities between CPAs—namely in the role of auditor—and journalists, and how the current economic environment is having an impact on these roles as protectors of the public trust. Both auditors and journalists require a high level of professional skepticism; both work the “fairness and accuracy” beat: one may attest to it, the other must provide it. Both are public watchdogs; whose roles in society are considered necessary in order for our democracy to thrive.

Of course, there are important differences that set them far apart—namely, that certified public accounting is a profession and journalism is not. CPAs are licensed and bound by enforceable ethical standards; those who fail to meet those standards risk losing their license and the ability to practice. There are established rules for CPAs, shaped and issued by federal and state regulators; journalists have none. Journalists, long defined as practitioners of a trade that required no formal education, face no real penalty for failing to meet the public's expectations of objectivity in their work; the only standards they must meet are the codes of conduct enforced by their employers or professional associations.

As we watch newspapers fold across the country, it's hard not to wonder what type of long-term impact a diminished fourth estate will have on the ability of our democracy to function and thrive. Thomas Jefferson said no less in 1799: “Our citizens may be deceived for awhile, and have been deceived; but as long as the presses can be protected, we may trust to them for light.” The presses are not being protected; in fact, they're literally being sold as scrap metal, relics of a bygone era in our new, more self-contained digital environment. On top of that, more and more journalists and editors are being asked to cross what used to be a very well-defined line between editorial and advertising. Reporters are now concerned with search engine optimization (SEO), increasing page views, and feeding the 24-hour news cycle that the Internet has created. They rely on press releases issued by government entities and special interest groups to fill the news hole left by the layoffs of thousands of colleagues. This leaves the public uninformed and unaware—a dangerous place for a democracy.

Auditors also balance two interests, and they always have.

Shared Obligations and Aims

Auditors also balance two interests, and they always have: they are charged with meeting the CPA's professional and independence standards, as well as those of the client, who pays them for their services. The Public Company Accounting Oversight Board (PCAOB) has taken a greater interest in auditor independence recently, stating that in this environment of quickly evolving accounting standards due to “new economic realities … it is reasonable to ask again whether the current combination of the auditor payment model and independence rules, even coupled with individual audit partner rotation requirements, is adequate to deal with the potential conflict of interest that appear[s] to be inherent in the auditor payment model” (Lewis H. Ferguson, PCAOB Open Board Meeting, August 16, 2011).

The PCAOB continued its exploration of this issue through a concept release published last year and roundtable discussions conducted across the country. (See the May 2012 CPA Journal for a variety of perspectives on the topic.) The NYSSCPA has also issued a comment letter on this release; although it agrees with the PCAOB that auditor independence and objectivity is an important factor that should be strengthened and encouraged wherever possible, the Society believes that mandating audit firm rotation is not the optimal way to address this problem because it could have the unintended effect of reducing overall audit efficacy. Engagement partners, particularly those in smaller firms, need time to develop and maintain the necessary skill set to properly audit SEC-registered issuers; this often becomes an industry-specific specialization that successor firms would find difficult to pick up.

Regardless of your position on the PCOAB's proposal, this is the right conversation to be having right now. The CPA profession is not journalism, but for more than 100 years, the profession has shared its highest aim with that of journalists: to provide a service that protects the public. As our economic and business environments evolve (or diminish, in the case of the press), it is necessary for CPAs, not only as a profession, but as Americans, to defend and protect the democratic institutions that have for so long protected us.

Joanne S. Barry. Publisher. The CPA Journal Executive Director, NYSSCPA.

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