ICYMI: Here’s a Hitler Video That Might Help Your Company Decide If It Should Outsource Its Internal Audit Function
The Hitler video meme died long ago, but I regret missing this jump the shark moment from 2010 when "Hitler Finds Out the Board is Keeping Internal Audit In-House." Mostly because I try to deliver these weighty stories to you all in a timely fashion, but even moreso that there's a slight dig at the […]
Top Accounting Schools Had a So-so Year in Men’s Basketball, According to the Nerdiest Bracket Ever
For the last couple of years, our friends at Brigham Young University have put together a simulated bracket to see how the NCAA Men's Basketball Tournament would shake out if the schools with the most productive accounting researchers were crowned winners rather than shooting a leather ball through a hoop. Exciting! Why do you need […]
Here’s How This Year’s NCAA Men’s Basketball Tournament Would Shake Out If It Were Based on Accounting Research Production
It’s that time of year again where thousands of Americans spend countless hours of company time researching basketball teams and agonizing over which #12 seed will pull a minor upset only to have someone from marketing, who doesn’t know a damn thing about basketball, to win the pool. It also marks the time of year when the accounting faculty at BYU puts outs their own simulated version of the tournament, played out based on the productivity of accounting researchers over the last six years.
As you can see, a lot of similar schools are making a run again this year including Texas (last year’s simulated champion) and Michigan State. If you’re interested in what this year’s non-bracketed accounting rankings are, you can check them out on the campanion research page.
Games start on Thursday tomorrow (obviously I’m not in a pool) so if you’re having trouble filling out your bracket, this seems like a good place to start. You could do a helluva lot worse when it comes to strategy.
Fraud Experts: Calls for Criminal Charges Against Ernst & Young Are ‘Absurd’
Since Andrew Cuomo decided to make our lives insanely busy this week, we’ve been talking to lots of different people about what will happen next in the Ernst & Young saga. We stumbled across a couple of experts, Dr. Mark Zimbelman an Accounting Professor who specializes in fraud, forensic accounting and auditors’ detection of fraud at BYU’s Marriott School of Business, along with his son, Aaron Zimbelman, a doctoral student at the University of Illinois at Urbana-Champaign whose research interests include auditing, financial statement fraud and corporate governance.
The father and son team have a blog, Fraudbytes, that discusses, well< arious forms including a post from yesterday about this week’s developments.
We corresponded with the Zimbelmans by email for this interview. They have combined their positions to provide us with the answers to our questions.
Going Concern: Does E&Y risk losing creditability with the market at large (á la Andersen) because of these civil fraud charges?
Zimbelmans: We don’t think this case will hurt E&Y’s credibility, based on what we know at this point. Lehman’s accounting for Repo 105 transactions was in accordance with GAAP and appears to have been a common practice for similar transactions in the industry. In other words, E&Y was probably following the letter of the law in signing the audit opinion. In Andersen’s case, the firm had shredded documents and faced criminal charges. Until we see a clearer act of wrongdoing (e.g. a clear departure from auditing standards), we don’t see E&Y individually facing a significant loss of credibility. More likely, the auditing and accounting profession as a whole will take a credibility hit as individuals question the standards and industry norms adhered to by E&Y in auditing Lehman.
GC: Reports say that E&Y is in talks to settle – how do you interpret their willingness to settle rather than litigate in this matter?
MZ/AZ: We think a willingness to settle speaks mostly to the great deal of uncertainty associated with the litigation process in auditing cases. Jury trials in cases like these can be very unpredictable and may not be strongly related to whether or not E&Y actually did anything wrong. Juries tend to have a poor understanding of auditing and accounting issues and also tend to side with victims and against deep pockets. In this case in particular, were the case to go to trial, E&Y has a good chance to become a scapegoat for the collapse of Lehman and perhaps even the economic crisis as a whole. Even if the probability of a verdict against E&Y were fairly low, the damages assigned by a runaway jury could be devastating. This gives E&Y a strong incentive to settle, regardless of whether or not they did anything wrong.
GC: Is there any advantage to litigating?
MZ/AZ: If the requested settlement amount would be devastating to E&Y, the firm is better off litigating. The firm may also be better off litigating if the requested settlement amount is high and E&Y feels they have a very solid case that has a good chance at overcoming the common jury biases we discussed in the previous question.
GC: How would you react to those who feel that are calling for criminal charges against the firm?
MZ/AZ: We don’t really see any criminal behavior here–E&Y allowed Lehman to account for Repo 105 in accordance with GAAP and in accordance with what was fairly standard in the industry. Until we see evidence of potentially criminal behavior, calls for criminal charges seem absurd.
GC: Prediction time: what happens next? Fine of $X and….?
MZ/AZ: We doubt there are any criminal issues here. E&Y will likely try to settle as quickly as possible to get this behind them. Cuomo is likely to want a huge settlement because of the magnitude of the bankruptcy and because of the potential for a runaway jury. Given that Lehman’s bankruptcy was $691 billion, this settlement could easily exceed E&Y’s Cendant settlements which were over $600 million.
Three Big Benefits to Getting Your PhD in Accounting
Not so long ago, we presented you with the interesting results of the Final Four if schools advanced based the number of accounting research papers produced. This may or may not have piqued your interest in the possibility of ditching the grind of 9 to whenever you get off for the friendly confines of a college campus.
For those of you that are interested, Professor David Wood of Brigham Young University passed along a link that compiles information for anyone giving serious thought to going back to school. We also got some of his thoughts about his own experience as a professor.
Other than everyone calling you “Doctor” there are three benefits that professors enjoy that is listed on BYU’s “So You Want to Get a PhD.?” page. Granted these don’t apply to just those in accounting but to anyone looking to dive into higher ed instruction:
Professors are constantly learning – “Professors spend the majority of their time teaching and researching. Both of these acts are rooted in learning and sharing your learning with others.” Learning? You mean people enjoy learning? Constantly? Yes, it’s true that some accountants are in it for intellectual stimulation as opposed to the glamor, riches, and title. Professor Wood wrote to us in an email, “Every day is filled with exciting new challenges—from thinking about how to improve business through my research to trying to better communicate and reach students.”
Professors want to make a difference in the world – “In the classroom, professors are role models to their students and teach students how to make the world a better place.” Yes there’s some mushy stuff but that’s good, right? Being able to guide future accountants by showing them different paths that careers can take, what opportunities exist now and what the future holds is a rewarding part of a professor’s job. Professors have the amazing opportunity to inspire young minds to want to make a difference in their chosen career. As Professor Wood told us, “College students are at an important cross road in their life and professors can help provide clarity and information for students to make well-informed, good decisions.”
Life as a professor is full of flexibility – “Not only do professors largely work when and where they want, but they also choose what they do.” This is the stuff that most can only dream of in most corporate/Big 4 world – work when you want, where you want, time for hobbies and other activities. Sure you had to work hard at researching and teaching the new wave of CPAs but there’s a lot freedom that comes with it. Again, Professor Wood, “I don’t know any other career that offers the flexibility of academics without bearing substantial financial risk.”
There you have it. Lots of learning, you get to inspire young minds and you basically can live the way you want. Of course it involves some work too but we’ll touch on that later. Meanwhile, you can ponder.
So you want to get a Ph.D.? [BYUaccounting.net]
What if the Final Four Was Based on Accounting Research Production?
We realize this is a strange question but hear us out. Many of you have had brackets on the brain for the last couple of weeks and this was not lost on some faculty members at Brigham Young University. David Wood, Brady Williams, Scott Summers and Joshua Coyne created the bracket below to demonstrate what this year’s NCAA tournament would look like if the schools advanced based on the productivity of accounting researchers. It was based on their paper entitled, “Accounting Program Research Rankings by Topical Area and Methodology.”
We spoke with David Wood, Assistant Professor at BYU and he clarified for us that the bracket was based solely on the schools in the 2010 tournament. “For example, Stanford is rated first for number of articles published but they weren’t in this year’s tournament, so their productivity isn’t seen here,” David said.
As you can see above, BYU did okay for themselves, reaching the Final Four, along with real-life Final Four teams Michigan State and Duke. Ultimately, accounting powerhouse Texas-Austin came out on top, taking out the CPA mavens at Wake Forest in the first round. Professor Wood explained, “There is a disconnect between CPA exam success and research production,” thus a research program like McCombs that produces many papers every year will always come out on top.
Eleven journals were selected for the purposes of the paper:
• Accounting, Organizations, and Society
• Auditing: A Journal of Practice & Theory
• Behavioral Research in Accounting
• Contemporary Accounting Research
• Journal of Accounting & Economics
• Journal of Accounting Information Systems
• Journal of Accounting Research
• Journal of Management Accounting Research
• Journal of the American Taxation Association
• Review of Accounting Studies
• The Accounting Review
Now before you judge, this particular method of illustrating both basketball and accounting prowess may serve those of you well that are considering a PhD in future. Don’t laugh, we know you’re out there.
Accounting Program Research Rankings by Topical Area and Methodology [SSRN]
NCAA Tournament Simulated Using Accounting Research Rankings