ISO 9000.

ISO 9000 was developed by the International Organization of Standards (ISO), a European Community body that sought to establish worldwide quality standards. ISO 9000 addresses process quality standards, not product quality standards. It does not involve, for instance, checking to see if a TV has top-notch color but, rather, examining the process and the controls used during its manufacture.

ISO 9000 has different levels of certification depending on the complexity of manufacturers' operations, which range from warehousing and distribution (for smaller manufacturers) to full product design, manufacturing, installation and service (for larger companies). No matter what certification level is sought by a manufacturer, ISO 9000 requires a heavy reliance on written policies, procedures, quality documentation and so on.

In recent surveys, 51% of American midsized manufacturers said they were not certain what ISO was and weren't interested in certification. This is unfortunate, because midsized manufacturers earning $250 million or less are the country's real economic base. Further, ISO 9000 certification stresses many of the areas where such companies do poorly--such as documentation, policies and procedures.

Also, there is an awful lot that manufacturers can gain from complying with ISO 9000 even if they don't become certified, because the whole process focuses on how manufacturing operations work, how they're controlled, how they're optimized--peeling back every manufacturing area layer by layer and looking to see if it really is coordinated or if there are stand-alone departments that don't integrate with anybody else. As manufacturers document such functions under ISO 9000, they start finding out who's not in the loop.

ISO 9000 certification primarily is performed by registrars. There are around 35 registrars in the United States, the biggest being Underwriters Laboratories. Many are franchises of European Community registrars such as the British Standards Institute.

KPMG Peat Marwick plans to become the first major U.S. accounting firm that is an ISO registrar.

But the real role of U.S. accounting firms will be conducting precertification audits, which are "walk-throughs" to see if policies and procedures are coordinated, if a quality manual was created and so on. That's the type of service accounting firms have been providing all along: taking a look at a manufacturer's operations and saying, "The way you bring material into your receiving dock and record what's there and the quality testing you do seem kind of weak." It turns out this is almost chapter and verse from ISO standards. Firms were doing portions of this work in the past, although under different standards, with a different emphasis and to a limited extent. ISO 9000 is drawing it all together.

Accountants should be warned there's a lot of bad information floating around. Also, there's a perception that certified companies are "better" than companies that are not. When you cut through the smoke and mirrors, ISO certification says you've attained the goals you set for your processes. If a manufacturer says it's going to put out 80% bad material and 20% good material, as long as that's documented--as long as that's what its goals are and it's determined that everybody is working toward those goals--it can be ISO certified.

William J. L. Swirsky, vice-president of professional affairs, Canadian Institute of Chartered Accountants.

CPAs should be interested in IS0 9000 quality standards because their clients and their companies are becoming interested in them. Most clients selling products in the EC currently must provide proof of ISO 9000 certification. Also, large companies, such as Ford and General Motors, are requiring more of their suppliers to obtain ISO 9000 certification. Even some governments are looking at ISO 9000. Here in Canada, some of the provincial governments and certainly the federal government seriously are considering a requirement for ISO 9000 certification by their suppliers.

To obtain ISO 9000 certification, a company must demonstrate it has systems in place that emphasize quality products or services. That's where the opportunity for CPAs comes in. Who should management choose to perform that function? Why not a CPA? After all, CPAs perform similar functions quite well for financial systems. Why couldn't they do so for quality systems?

CPAs should consider becoming certified to perform ISO 9000 audits. The American Society for Quality Control (611 East Wisconsin Avenue, P.O. Box 3005, Milwaukee, Wisconsin 532013005; phone: [phone]) can provide information on the certification process. ISO 9000 should demonstrate to CPAs that the skills acquired as financial auditors can be applied to other areas, such as auditing quality control systems.

Richard M. Ubinger, CPA, a director in the audit department, Price Waterhouse, Pittsburgh.

The primary thing CPAs should know about ISO 9000 is that, properly applied, it is just like any other total quality management program. It can be a driver to change, to improve the production process in a way that will promote either revenue growth or the ability to fund new projects, do research and development or maintain a position in markets a company already serves.

ISO 9000 is very documentation-driven-individual processes need to be documented to a very high degree of detail, which is uncommon in today's business environment. The goal of ISO 9000 is to promote the consistency of product quality; it is not intended to promote product quality. While ISO 9000 looks for opportunities to correct problems, there is no requirement that change occur if a system is found to be functioning properly.

CPAs can play the role of auditor and perform the quality audits required under ISO 9000. While those audits currently are performed mostly by engineers, I believe auditors can audit to any standard. ISO 9000 standards call for four levels of documentation--a quality manual, procedure documentation, work instructions and quality records. Everything is documented to the point that all auditors need to do is go in, see the documentation and do a traditional audit.

There are certain skills auditors have that engineers don't necessarily have. I went through the certification class to be a lead assessor under ISO 9000 and found I already was familiar with much of the material from my audit training. A majority of my classmates were engineers who had difficulty grasping some of the concepts because of their different type of training.