How is your reputation faring? Surveys indicate booth good and bad news for CPAs. (From the CEO).

NEARLY 18 MONTHS have passed since Enron declared bankruptcy, beginning a series of corporate and accounting scandals that led to the indictment, conviction and dismantling of one of the largest and most respected accounting firms. Indictments of many corporate executives and an overhaul of the regulatory environment for accountants also followed. No longer is the profession responsible for establishing standards of practice for audit of public firms. New conflict rules apply and a new federal apparatus is being established to regulate the profession. At the state level, there are new rules and the California Board of Accountancy no longer has a majority of CPAs.

The profession has responded with thoughtful and reasonable proposals to ensure greater protection of the public, separation of duties and disclosure of relationships. However, some responses have been divisive within the profession, with CPAs from one sector willing to criticize members of another area or size of practice and distance themselves from colleagues. But everyone stated the profession's commitment to honesty and declared no tolerance for accountants willing to break the rules.

But what does the public think of the accounting profession now? Two reports have been released that can help answer this question. The first is a CNN/USA Today/Gallup Poll conducted in November. The second is an AICPA research project that was conducted in December and January by Penn, Schoen & Berland Associates Inc. This project examined the attitudes of business decision-makers and investors toward accountants.

PUBLIC PERCEPTIONS

In the Gallup Poll, accountants rated highest over among business professionals and nearly identical to bankers when the public was asked to rate certain occupations for honesty and ethical standards. The survey was topped by nurses and followed by military officers, high school teachers, clergy, policemen, druggists, medical doctors and funeral directors. Behind accountants and bankers, journalists were next, but then the numbers fell dramatically for congressmen, building contractors, business executives, lawyers, labor union leaders, real estate agents, stockbrokers, advertising practitioners, car salesmen and telemarketers.

As a comparison, 79 percent of the public rate nurses high or very high for honesty and ethics. For accountants, 35 percent rate the profession highly, while 52 percent rate it as average in honesty and ethics, and 10 percent rate it low.

These numbers show that the profession has room for improvement, but this percentage really has not changed much over time. In 2000, the first time Gallup asked the people about their attitudes about accountants, 38 percent rated the profession highly. At the low point, in. February 2002, the rating hit 32 percent.

What does this tell us? After Enron, accountants' reputation for honesty fell by six points, but three of those points were recovered by November.

The American public consistently responds to the Gallup survey by rating those in the service professions, such as nurses, doctors, pharmacists, teachers and clergy, higher than any business people. In the business categories, CPAs rate highest, along with bankers. Business executives rate nearly 20 points behind CPAs and bankers for honesty and ethics, which shows a substantial amount of cynicism about business practices by the public.

Only 10 percent of Americans rate CPAs low on honesty and adherence to ethical standards. From this we can conclude that, while they don't find accountants to be particularly high on standards of honesty, they don't distrust them.

Does this meet the standard for the label "most trusted adviser?" One might say no. with only 35 percent rating accountants as highly trustworthy. However, you could say yes because accountants rate highest among the business categories, and you can't reasonably expect accountants to defeat a pervasive anti-business attitude that has been consistently held by the American public.

BUSINESS DECISION MAKERS

Since the AICPA-commissioned research by Penn, Schoen & Berland surveyed business decision-makers and investors, it is free of the anti-business bias that may have been reflected in the Gallup Poll. While the questions were different, the results can shed some light on the reputation of accountants among senior management and executives who retain CPA firms for audit, tax, financial planning, management consulting or information technology services.

Business people see CPAS in a much more favorable light than the public, with 94 percent rating them favorable or very favorable, second only to physicians, and ahead of CFOs, CEOs, commercial bankers, attorneys, investment bankers, stock research analysts and stockbrokers.

Some 89 percent of business people believe that the credibility of the accounting profession has suffered "in light of recent accounting scandals." These decision-makers primarily blame CFOs and CEOs for these scandals, followed by boards of directors, in-house accountants and auditors, and external auditors.

Some 86 percent of these business people agreed that the accounting scandals reflected poorly on a "few bad apples," but not on the profession as a whole. And two-thirds believe that the recent events reflect poorly on the Big Four accounting firms, but not on other CPAs. However, nearly two-thirds reported that they believe the scandals reflect poorly on how all CPAs do their jobs, regardless of practice setting.

More than 90 percent of business decision-makers agree that CPAs are committed to the rules of the profession, competent, reliable and demonstrate integrity, ethics and sound business judgment. Agreement that CPAs tell the truth no matter what falls to 87 percent, and 42 percent (47 percent in the West) agree that CPAs are willing to cut corners for their clients.

Some 85 percent of business people see the job of an external auditor as protecting shareholders against fraud, although they don't think auditors are likely to deliver on that job. Two-thirds of them believe that the auditors will have difficulty discovering willful fraud perpetrated by management. More than 80 percent believe that outside auditors face an inevitable conflict between serving the public interest and the client, and that employed CPAs are likely to be influenced by corporate pressure.

While business decision-makers see CPAs more favorably than the public, they demonstrate similar cynicism. They believe that the job of the auditor is to protect the public from fraud, but they don't think the auditor is likely to be successful, and they see an inherent conflict between this role and client or corporate service.

INVESTORS

Investors surveyed by Penn, Schoen & Berland own stocks, bonds or mutual funds in bank, brokerage or 401(k) accounts. They were asked the same questions as the business decision-makers and generally responded in the same direction, although their favorable attitudes toward CPAs were somewhat weaker. They rated CPAs about as favorably as business people did, but rated CFOs and CEOs substantially below the level of the business people, and trust stockbrokers more than business decision-makers.

The investors do not rate CPAs nearly as highly as business people on commitment to the rules, competence, reliability and sound business judgment, with their strong agreement lagging the business people by 15 percent. And they see CPAs as even more willing than the business people to cut corners for their clients, with 49 percent agreeing that CPAs will do so.

They agree that the job of the external auditor is to protect shareholders from fraud and also doubt the auditor's ability to do so. Some 80 percent believe that external auditors face a conflict between their duty to the public and to their clients, about the same as reported by the business decision-makers. But 90 percent of investors believe that CPAs who work for companies will be influenced by corporate pressure, a significantly higher percentage than the business people.

CONCLUSIONS

Taken together, these are mixed results to be sure. The general public, business decision makers and investors all hold CPAs in high esteem, at least when you compare their attitudes toward CPAs to their attitudes toward business in general.

Information from business people and investors, however, reveal that both groups see the auditor's job as discovering fraud, but neither expects that the auditor can accomplish that. And while they report high levels of trust in the profession, they also seem to be saying that they do not believe CPAs can exhibit independence, whether they are from outside firms or employed within companies.

For a profession that values independence so highly, some reflection seems in order.

Are we not telling our story to the public in a credible way, or are the public, business decision-makers and investors onto something? Is true independence possible? Do we really mean integrity when we talk about independence? Integrity is an extremely high standard for the profession, but does not carry the connotation of omnipotence, omniscience and even fearlessness that independence might require.

What do you think?

onesty & Ethics

(RATINGS OF HIGH OR VERY HIGH)


Nurses         79%
H.S. Teachers  64%
Clergy         52%
Accountants    35%
Congressmen    17%
Telemarketers   5%

Source: Gallup Poll

Note: Table made from bar graph

rofessionalFavorability

(FAVORABLE/UNFAVORABLE)

                            Business
                         Decision-Makers  Investors

Physicians                    93/6          92/7
CPAs                          94/5          90/6
CFOs                          87/9          59/33
CEOs                          86/11         55/40
Commercial Bankers            83/14         70/20
Attorneys                     65/33         60/35
Investment Bankers            63/30         62/26
Stock Research Analysts       47/41         49/32
Stockbrokers                  51/44         60/33

Source: Gallup Poll

Susan B. Waters, CAE, is CEO of CalCPA. You can reach her at [e-mail] or [phone].