New York, N.Y.
On the last day of our trip to the accounting “motherland,” we visited the Public Company Accounting Oversight Board (PCAOB) near Radio City Music Hall in Manhattan.
We were graciously welcomed to the PCAOB—when we arrived, there were legal pads, pens and bottles of water at each of our seats. Note-taking had never been made so easy, and it’s a good thing because we had a lot to learn. A panel of three PCAOB inspection team members showed us a video that detailed the formation of the PCAOB. The PCAOB was established in reaction to accounting scandals in the early 2000s and the subsequent passing of the Sarbanes-Oxley Act.
The panelists told us about their day-to-day work—inspecting the auditing practices of accounting firms. I was surprised to learn that the PCAOB covers such a large range of firms. One day, inspectors could be in the boardroom of a downtown office building, meeting with firm partners and industry specialists. On the next day, they could be perched on a sofa in the basement of a house in Brooklyn, reviewing the audits done by a small firm.
Our session with the PCAOB was the most interactive of the trip. The presentation quickly turned into an open discussion with the panelists, as each of our questions sparked another. As W&L students, this type of environment was most natural to us. It seemed like the PCAOB members were pleasantly surprised by the interest we took in their work.
One interesting question fielded by the panel was, “Why leave a job at a large accounting firm to join the PCAOB?” The responding panelist talked about the advantages of being away from the client service side of things. He liked how this allowed him to focus solely on accounting issues, without having to worry about selling business or satisfying clients. Additionally, all of the panelists talked about the better work/life balance they had found at the PCAOB. One member jokingly chimed in, “We’re not in it for the loot.”
We left the office with an understanding and appreciation of the important role the PCAOB plays in ensuring the integrity of auditing practices and protecting investors.
After grabbing a quick bite at the nearest Chipotle (an establishment revered by most W&L students), we hopped on the bus and headed south for Lexington. As I close this entry, I would like to formally thank Professor Irani for organizing this trip, and for putting up with our endless shenanigans.
Greetings from “The Motherland”
Most of my spring term class, Contemporary Cases in Financial Accounting, takes place on campus, but we are enjoying a brief trip to Connecticut and New York, where we’re visiting with various professionals involved in the accounting standard-setting process.
After a good night’s rest in the posh Hotel Zero Degrees in Norwalk, Connecticut, we were eager to begin our visits. All of us dressed up for the visits, and I think we turned a few heads as we filed onto the bus.
The day began with a visit to the Financial Accounting Standards Board (FASB) headquarters. Upon arrival, Professor Irani remarked, “The Motherland.” This was a funny yet appropriate comment, as most of our accounting education thus far has been rooted in the standards set by the FASB.
At headquarters, we sat in on a board meeting in which the board and staff were discussing proposed changes to the presentation of certain items on the income statement. We were simultaneously reassured and overwhelmed by the fact that so much attention is applied to the minutest details. For the entire time we were in the room, the board was engaged in intense deliberation over the definition of “infrequent” and its implications for financial statement users.
After the board meeting, FASB staff members shared more information about the standard-setting process. They talked about their recent work to change the revenue recognition standard, and walked us through some of the grey areas of “collectability.” Collectability is part of the requirement to recognize revenue, and the staff used this example to illustrate how FASB and its constituents go back and forth to iron out issues in the standard-setting process.
Next, two gentlemen from the FASB Post-Grad Technical Assistant (PTA) Program came in to talk to us about their experiences at the FASB. They went over the process for becoming a PTA, which was extremely helpful. It was interesting to learn that college graduates can become part of the FASB team right out of school.
Soon thereafter, we hopped on the bus and made the quick drive to Stamford, Connecticut, where we grabbed lunch and headed to Deloitte’s national office. We met with a W&L alum, Rob Moynihan ’02, and one of his colleagues. They discussed Deloitte’s stake in the standard-setting process, and highlighted the importance of weighing input from the Big Four accounting firms. They are the ones who implement the standards everyday in practice.
We were all relieved when Rob told us about the “Technical Practice Aids” provided by the American Institute of CPAs (AICPA). The aids help to fill in some of the blanks in the standard, and supplement the sometimes-vague guidance in the FASB codification. We would have loved to have the aids last week in class when we were combing through the codification, searching for solutions to real-life accounting brain-busters with Professor Irani.