Post Enron Strategic Planning

It’s a New Game!

It often takes a major crisis to effect significant change. Unfortunately, that is where the accounting profession finds itself now.

We have been aware for some time that the value of our core service, the audit, has been declining in the eyes of the public. Our profession has debated the subject from many different points of view, sometimes with much passion. Yet we have hesitated to make the changes to move this essential service from an industrial model to one designed for the information age. Now we find ourselves in the position where others will make some of these decisions for us.

This time of crisis is an opportunity for each of us in the accounting profession to acknowledge what is broken, accept responsibility for our profession and assist in identifying innovative solutions for our clients in order to regain their trust. This is not just a large firm problem. The splatter from the Enron collapse will stain local firms as well. Not only will our reputation as professionals suffer, the nature of the services we provide will change.

Many of the financial reporting issues identified in the Enron matter are issues that large and small firm auditors have had to deal with for years. Questions about independence, financial reporting and materiality have been around for as long as I’ve been in the profession. Let us now take the high road and address the tough questions facing our profession. Now is the time for all good accountants to come to the aid of their profession, their staff and their clients.

The case AGAINST surprises.

We know the direction that government agencies are heading with recent recommendations of the SEC and the independence rulings published in January 2002 by the OMB. These rulings and recommendations will severely limit the CPA’s ability to provide material consulting services to clients where they render audit services. We must not fool ourselves that the limits will apply only to publicly owned companies. The ripple effect is well known – restrictions will trickle down in one form or another to encompass all audits.

Don’t surprise your clients! Prepare now by evaluating your client relationships and the services currently performed for these clients. Next, develop a client-specific solution and strategy. Where you perform both audit and consulting services, will you continue as the auditor or will you choose to only provide non-audit consulting services?

Once the profession finalizes the new audit requirements, sit down with each client to discuss the problem and your plan to address their situation. Gain their consensus for your recommendations. Don’t surprise your clients by just telling them they must find someone else to perform certain services. Be proactive and help them with the solution

Don’t surprise your staff! Now, not later, you need to speak with your staff members. Innuendo, rumor and speculation about the future most likely are already in your office. Be proactive. Print your ethics statement, your written values statement, your independence policies, your conflicts policies, and anything else you have that demonstrates your firm’s commitment to quality.

Hold a staff meeting to discuss these documents and reinforce how seriously the firm takes its policies. Remind people of your firm’s commitment to quality. Be candid in stating that you do not know with certainty what the future will hold, but that you continue to be proud to be associated with our honorable profession. Assure everyone that changes to the profession likely will be a good thing in the long run, and that management will be actively seeking the opportunities that will come about because of the changes. Encourage anyone with questions about the potential impact to ask your opinion.

The next step is to determine the potential impact that your client decisions will have on the firm. Will there be departments in the firm that will no longer have enough critical mass to remain profitable? Will staffing adjustments need to be made to maintain profitability? These and many other questions will need to be addressed among the partners. Once more information is known, go back to the staff members. Keep the communication level high and the speculation to a minimum. Look for the opportunities that will arise because these changes have to be made.

The only constant is CHANGE.

Upcoming changes will create both positive and negative implications to your firm. How we choose to react to these changes will determine your ultimate success in the future.

Increase Firm Visibility. This is no time for members of our profession to stick their heads in the sand. We need to be visible. We need to participate in the debate and in finding solutions that will continue the public trust our profession has enjoyed for many years. Gain an understanding of the issues and be ready to communicate how your firm has addressed these issues in the past and how you will address them in the future. A positive, proactive approach will bring issues to the surface more quickly and allow us to adjust our services accordingly.

• Offer to speak to business organizations
• become a source for your local television stations and newspapers
• visit your local colleges to reassure students that the CPA profession still offers wonderful opportunities.

Our profession needs to assume a leadership position and participate in finding the solutions to the very complex financial reporting needs of our society. The public and our clients expect nothing less from us. I know we are up to the task.

Now is the time for action.