Accountants, financial planners see opportunity
Locals not tarnished by Andersen scandal

by Christopher Key

 

For years, accountants have been stereotyped as reclusive creatures with half-glasses and green eyeshades who excel at counting beans and picking nits. One local accountant, displaying a non-stereotypical sense of humor, thinks that one good thing to come out of the Arthur Andersen debacle is that it might give his profession a racier image.

In reality, the national scandal has had a variety of effects on local accountants and financial planners. Certified Public Accountants (CPA) were among the most heavily regulated professionals even before Andersen and Enron. Now, the state Board of Accountancy is reviewing its rules and the Sarbanes/Oxley Act has created an accounting oversight board at the national level.

“No one wants to see this (the corporate accounting failures) happen in Washington state,” said state board chair James Caley. “We don’t want people to lose their jobs or their savings because of poor accounting.”

At the heart of the issue are the “independence rules.” These are designed to protect accountants performing an audit from undue influence by their client. Some accounting firms that perform audits of publicly held corporations are the same firms that provide other accounting services for their clients. The new rules may require that separate firms undertake the two roles, which could open up a lot of new opportunities.

Moss Adams LLP is the only firm in Whatcom County that audits publicly held corporations. It is the 10th largest accounting business in the nation and the largest headquartered in the west.

Because many of the new rules are still under review and because both federal and state governments are involved, accountants in the local Moss Adams office find themselves in a state of turmoil.

“We’re doing a lot of second-guessing,” said Russ Wilson, managing partner of the Bellingham office. “We don’t know how to react. We don’t know what the new rules will be. There is bound to be some confusion while we sort out the new standards.”

Those new rules will include regulations covering audits of governmental agencies. Moss Adams does a lot of work for tribal governments. The potential impacts could be huge.

“We don’t know at this point,” Wilson said, “if we will be able to provide other services to organizations we audit.”

Wilson is concerned about the effect of the new rules on small businesses that may not have the resources to hire separate accountants for audits and other services.

“The CPA is a close advisor to the small business,” he said. “Businesses trust their accountants. What happens if you take that trusted professional out of the equation? Playing both roles can be a strength. Knowledge gained in the audit process can be applied in other areas.”

In the long run, Moss Adams will probably suffer very little if the separation of roles is mandated. Wilson also sees the company as gaining a lot from the internal dialogues sparked by the scandals.

“We’re talking more about business ethics, core values and purposes, ensuring the safety of our clients,” Wilson said. “It’s a good process. The tolerance for clients that won’t do the right thing is waning. We have to tell them what they need to hear, not what they want to hear.”

Moss Adams accountants find themselves spending more time with clients these days.

“We have to fix problems, no matter how small,” Wilson said. “Everything is significant. We’re doing more self-policing; we have a higher awareness of the importance of what we do.”

Enrollments in college accountancy programs have taken a dip and Wilson speculates that the scandals could be scaring good people away.

“The image of accountants has been changing for years now,” said Wilson, “If some are seen as scoundrels, does that make us more interesting? If nothing else, this situation has highlighted the roles of accountants in the public consciousness.”

Wilson believes the public is losing its tolerance for white collar crime.

“The pressure to make earnings meet projections is easing up,” he said. “Securities dealers are under increasing scrutiny. Pension reform is back in the spotlight. The public will be more secure in the end.”

Posters from James Brown and Beatles concerts adorn the walls of Scott Davis’ accounting office. That’s one of the ways he bucks the stereotype. The big accounting scandals haven’t had much effect on his one-person operation.

“I think it has made us more aware of the traps out there we can fall into,” Davis said. “Most of us are brushing up on our ethics courses.”

What damage has occurred is mostly a matter of image.

“Accountants had halos for many years,” Davis said. “We were the patron saints of the business world. Now the pedestal has been pulled out from under us.”

He believes it has made accounting professionals much more concerned about certainty.

“Having a vague idea in the back of your mind is not good enough any more,” Davis said. “There is a difference between auditing and other services and in my opinion, you can’t be both.”

There were, he noted, big accounting firms that indisputably crossed some lines.

“Investors are justifiably angry at accountants who signed off on cooked books,” said Davis, “but the vast majority provide a good service and always have.”

Part of the stereotypical image comes from accountants having to be left-brained and analytical.

“This profession only rewards creativity to a certain point,” Davis said. “Accountants who get too creative wind up in jail.”

The complexity of the tax laws, for example, leaves a lot of grey areas that are subject to interpretation. The key, according to Davis, is knowing which areas are grey and which are black-and-white.

“It’s a shame that the average wage earner has to hire somebody to figure out his taxes,” Davis said. “Our resources could be put to much better use. I think most CPAs feel that way.”

He sees his role as much more than just a number cruncher.

“I can help clients with business plans and human resources issues,” Davis said. “A good accountant can greatly reduce the stress level of a small businessperson. Once your business reaches a certain level of complexity, you need to have accounting systems in place. Your money is a finite resource. An accountant can help make sure it’s well spent.”

Another proprietor of a one-person office is Bev Dawes. She was in banking before she became an accountant and discovered there’s not much money in being a teller. She agrees that small firms like hers haven’t been affected much by the corporate scandals.

“We’ll all have to learn to deal with new regulatory bodies,” Dawes said, “and we’ll see some new opportunities as a result.”

One of the advantages of having a small operation is that she can get to know her clients better.

“My clients don’t have to deal with layers of people,” Dawes said. “I can be more flexible in meeting my clients’ needs.”

She thinks we’re doing quite well here in Whatcom County given what we’ve been through in the last couple of years.

“Yes, we’ve been touched by Georgia-Pacific and Intalco,” Dawes said, “but we’re learning to reach compromises with environmental and industrial needs. There are ways to provide jobs without hurting the environment.”

Dawes doesn’t worry much about people turning to accounting software.

“You can do well enough with it for a while,” Dawes said, “but software can’t handle complex issues. You have to know where to put the numbers.”

That leads her to caution those who rely on commercial tax preparers.

“CPAs are required to take five days of continuing education a year,” Dawes said, “while most tax preparers are not.”

Keeping up with the complexity of the tax laws is practically a job in itself.

“I try to help people become as self-sufficient as possible,” said Dawes. “I want to help them learn.”

While Phil Multop is a CPA, he also has a master’s degree in taxation and certification as a financial planner. He wanted to concentrate on financial planning rather than audits and had some differences with the state board, which frowns on people who want to do both. Eventually, he had to drop his CPA practice and cannot advertise himself as such. He believes some changes are in the wind.

“The Big Eight (accounting firms) were dictating the agenda to smaller firms,” Multop said. “They were not allowing the smaller firms to branch out.”

He doesn’t see much expansion in the accounting industry, but financial, retirement and estate planning are enjoying a growth rate of better than 20 percent. Financial planning, according to Multop, is more important than ever.

“In the past,” he said, “we had defined benefit programs and the risk belonged to the corporations. IRA and 401-K plans have now shifted much of that risk to the employee. We’ve become a nation of stock market junkies.”

Multop takes an active interest in helping people make smart decisions.

“Where your treasure is,” said Multop, “there lies your heart.”

He believes that people are now coming to financial planners rather than stockbrokers.

“They operate in a boiler room atmosphere and have to meet certain quotas,” Multop said. “They’re more concerned about how much commission they can make. Financial planners have no quotas. We’re not pressured to make a sale that may not serve the client.”

His goal is to become a trusted financial advisor and keep the client for life.

“We want to make mutually beneficial decisions for our clients,” Multop said. “We consult with them at length and then implement those decisions.”

Most people, he believes, need to restructure their financial priorities.

“Many people spend too much time on retirement planning,” Multop said, “and not enough time on disability and long-term care. They’re not covering enough risk.”

He feels that it is his job to communicate with and educate the client.

“We conduct two to four interviews to make sure there is a good fit,” Multop said, “before taking any action. We don’t take every client, in the belief that it is better to serve a small number well. It’s all about knowing your limits.”

Bellingham’s Archer Group is a mid-size firm offering both accounting and financial planning services. They don’t audit publicly held firms, but do audit quite a few nonprofits. CPA Bernadette Halliday said the recent shake up has made everybody more cautious.

“Accounting is not a precise science,” Halliday said. “There’s more than one way to look at things. For instance, how do you expense advertising? You may pay for a contract in advance, but the actual ads run over a two-year period. It’s not cut and dried.”

She expects the new rules to make it somewhat more cut and dried, however.

“What about bartering for services?” Halliday asked. “What is the value of that? You didn’t pay anything, so there’s no cash value.”

Things like that, she claimed, are why you need an accountant in your business.

“I can’t say the scandals haven’t hurt the profession,” said Halliday. “Accountants have always been at the top of the trust list. We may still be there, but there is no doubt we’ve slipped a bit.”

Part of that is because accountants have been put in the position of being answerable to the public while being paid by a client. It’s a recipe for conflict.

“Sarbanes/Oxley won’t clear it up entirely,” Halliday said, “but it will set some hard and fast rules so that accountants are not put in difficult situations.”

Archer provides tax accounting, teaches QuickBooks, offers financial planning and small business valuations. Halliday does not fit into the accountant stereotype. She hunts, fishes and golfs.

“We’re not Scrooge,” said Halliday. “We don’t deal with money, but with numbers. In high school, kids who liked numbers were considered nerds. I guess that image carries over.”

She points out that just because you’ve audited a business, it doesn’t mean you know everything about them.

“Audits are not designed to detect funny business,” Halliday said. “It doesn’t mean that misstatements can’t be made. It’s just a judgment based on certain criteria. What auditors do is test. Is the documentation there? Are internal controls working? The auditor then offers an opinion based on these tests. It’s just not realistic to go over every piece of paper a business has.”

Larson Gross is another mid-size accounting firm. CPA Marv Tjoelker sees the industry as being full of opportunity now that there’s one less major player. He believes that accountants still have the public’s respect and trust.

“The big change,” Tjoelker said, “will be the focus on making auditors truly independent and objective. The mixing of services will end.”

This is especially true for those who audit publicly held companies. Larson Gross deals mostly with closely held private firms.

“The pressure is on the industry leadership to respond proactively to what’s happened,” Tjoelker said. “We must communicate to the larger community what our role is and rebuild trust.”

He agrees with other accountants that the stereotype is no longer valid.

“We have a person who coaches football and another who snowboards,” Tjoelker said. “We look for well-rounded individuals. Analytical types who are attracted to the profession are now trained in communications and understanding relationships.”

Accounting firms should be judged on the amount of expertise and resources they can bring to a business or personal situation.

“The most rewarding thing is to start with people at point A,” Tjoelker said, “and help them not only see where point B is, but how to get there. It’s not rocket science, just sound financial principles.”

He believes that accountants are far more than just number crunchers.

“We have to be able to develop a rapport with our customers and their employees,” Tjoelker said.

Is there life after Arthur Andersen in the accounting and financial planning industries? Local professionals believe there is not only life, but that life will get better. And maybe somewhere in the process, all those Dickensian stereotypes will go out the window.