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Sunday, January 30, 2005

Hold NY's accountants to account

What does the collapse of Enron, in one of the world's biggest financial scandals, have in common with the looting of the Roslyn School District, one of Long Island's worst recent public scams?It's the failure of accountants and of the rules overseeing them. And considering the business world's ever more complex transactions, New York State must do more to restore the confidence of stockholders and taxpayers in the financial dealings of corporations and schools.That's why the legislature and Gov. George Pataki must back accounting reforms that certainly would have made it harder for the alleged miscreants in Roslyn - at least passively abetted by their private auditors - to have gotten away so long with the quiet and systematic bilking of millions of dollars.The reforms were proposed by State Comptroller Alan Hevesi and backed by the state Society of CPAs and Sen. Kenneth LaValle (R-Port Jefferson). The Assembly should drop its objections and join the Senate in passing them.Reforms are long, long over due. The last time Albany made substantive changes to the 108-year-old accountant licensing law - the nation's oldest - mainframe computers filled whole rooms and Jackie Robinson had just broken the baseball color barrier. Just as green eye shades have been replaced by video anti-glare screens, so must the standards for those who use them.The first change is in whom the law covers. If a certified public accountant works outside an accounting firm, his or her conduct isn't subject to it. Lawyers can lose their license if they violate the law even if they aren't doing legal work - ask Bill Clinton, who lost his in the wake of the Lewinsky scandal. A CPA working as a chief financial officer for an Enron or Roslyn should risk losing his or her accounting license for wrongdoing.The changes would require CPAs to take more hours of continuing education - no state asks for fewer - and it would subject the work of more CPAs to more frequent peer reviews. All this would be more closely overseen by the state Education Department.CPAs also would be barred from collecting commissions on things like software they sell to clients, as was done by a Long Island accounting firm that failed miserably in many schools districts. In effect, it was auditing the performance of its own allegedly flawed system.These proposed changes, together with others aimed specifically at improving the expertise of school board members and the work of outside auditors, won't stop everyone who tries to cheat employers or customers. But the changes might have a deterrent effect by making it easier for conscientious watchdogs to catch honest mistakes and dishonest sc