The Responsibilities of Accountants

An accountant is a good accountant if in practicing his craft he is superb in handling the numbers. But a good accountant in handling the numbers can use that skill to misstate earnings to cover a multitude of problems with a company's books while staying within the law. So, the notion of a moral or ethical accountant is not the same as the notion of a good accountant. Our general principle would be that to be ethical a person has a responsibility to fulfil one's role or roles, as long as that role or roles are in conformity with acceptable goals for human life. What we mean by acceptable goals for human life are those that lead to societies where there are goods fairly distributed, which contribute to the quality of life in a way that allows as many people as possible to live fulfilled, abundant and flourishing lives. Assuming that our economic system and the businesses within it lead to a society such as that described above, the accountant has a role to play in that system which will specify the accountant's responsibilities. If accounting is the language of business, it is the auditor's job to see the language is used properly so that relevant material is communicated properly. In the system, the role of the independent auditor is to be a watchdog, “to see whether the company's estimates are based on formulas that seem reasonable in the light of whatever evidence is available and that choice formulas are applied consistently from year to year.” The responsibility of the auditors derived from their function is clear. The ultimate responsibility of internal auditors is to develop statements that present the financial situation of the company in a fair way, meaning as much disclosure as necessary to give a reasonable picture of the financial situation to any user having a claim to that knowledge. The function of the external auditor is to affirm that has happened by issuing an opinion as to whether the financial statement fairly presents the financial position of the corporation. The fulfillment of those functions is what is required for an efficient financial market. Those functions set the standards, the spirit of which has been seriously violated in recent years. Too much attention to the question of whether the financial statements formally complied with principles, practices and conventions accepted at the time should not be permitted to blind us to the basic question of whether the financial statements performed the function of enlightenment, which is their primary reason for existence. By virtue of their attest function, accountants/auditors belong to the class of gatekeeper intermediaries in the financial markets who have a “watchdog” responsibility. That responsibility requires the virtue of professional skepticism. “Due professional care requires the auditor to exercise professional skepticism.” “An audit of financial statements in accordance with generally accepted auditing standards should be planned and performed with an attitude of professional skepticism.” We lay out the practical requirements of meeting the obligations of skepticism, as well as looking at difficulties in maintaining such an attitude toward long time clients. The paper concludes by examining the following question. What caused this lack of due care? Why did the accounting firms fall short? Is this skepticism a realistic expectation? How much more do the other gatekeeper intermediaries contribute to the malaise?