Spotlight on accounting; company directors and accountants: don't go quiet, listen to your communicator!

Should the accountancy profession go quiet for a while until the auditing storm blows over? Or is the current debate an opportunity to build the reputation of accountancy?

Company directors, seeking to convince shareholders of the integrity of their businesses, will not relish the poor standing of the audit. A major contributor to the current dispute is poor communication about what an audit really is. Ask an accountant for a quick definition of an audit, and it's easy to become confused as he or she descends into jargon and complexity. Ask two accountants, and you'll get two differing answers. So there really is a communication problem here. Perhaps the profession has been "going quiet" for too long?

FUZZY FACTS

Just because the current debate is focusing on blame, the accounting profession should not put off engaging in profile building. In every instance of crisis or disaster (including natural disasters), our first instinct is to seek out a scapegoat. The media are full of finger pointing. Only with some help will we move on to what really happened and what it all means. If the accounting profession does not help us move on, who will?

The reason this climate offers such an opportunity for accountancy is that often we study things only when they go wrong. Now that the accounting profession is in the spotlight, it's time to communicate. The first thing to clear up is "what is an audit?" and surely this also relates to "what is an accounting professional?" Right now, the public has a fuzzy view of both.

Muddled messages accompany most crises. Just as truth is said to be the first victim of war, facts are an early casualty in a corporate crisis. The next phase in any crisis is to point the finger of blame, and right now the accounting firms are feeling the heat.

In most situations, it's how one reacts to an event, rather than the event itself, that holds the key to future progress or decline.

Reacting negatively is all too common among corporations facing a crisis. Their first instinct is to cover up; second, they lash out at anyone and everyone; third, they seek refuge in legal action; and fourth, they forget to inform their best friends (their staff, customers, suppliers).

By pretending there is no problem, they guarantee that it gets worse. Problems don't solve themselves; people solve them. And the trouble with lashing out when angry is that it formalises the dispute, setting your side of the argument in stone and making it harder to resolve.

POSITIVE PR--NO FINGER POINTING

Taking the positive approach is nothing new in public relations. Ivy Led-better Lee was a journalist who became one of two partners in a pioneering public relations consultancy, Parker and Lee, created in the U.S. in 1905. He saw the mistakes corporations made in trying to be secretive and offered an alternative approach.

Lee single-handedly changed the negative practices of the Pennsylvania Railroad, which had a policy of refusing reporters access to all accident sites. This policy led to substantial mistrust. Lee opened the lines of communication with the media. More important, he arranged for reporters to visit any accident sites, thus turning distrust into understanding. Reporting became more positive. There's a message here for accountants and directors: keeping the doors open creates real communication; closing them builds distrust.

In good corporate crisis management, these six steps pave the way to better communication:

* Get the facts (truth disappears when we are angry or in crisis).

* Communicate action (people respect you if you act positively, even if at first you were wrong).

* Review stance and processes (take a look at yourself: do you have to change?).

* Take market soundings (ask others what they think).

* Change behaviour and practices (you will improve if you try to change).

* Get the new message across (work on positive communication).

Much of this corporate experience can be applied to the accounting profession today. For example, the profession has been committed to change and improvement, but under a challenge like the one facing auditing, it's easy to become defensive and negative. That reaction will make things worse and ensure that the current audit crisis goes on for a long time. Rather than lashing out in haste, the profession should take its time and carefully consider the situation. At a personal and business level, patience is vital.

Many corporations get all the steps of crisis management right, but then forget to sustain their communication about the new message. As a result, the public either is confused or believes that the problem still exists. If the accounting profession is to move on from audit disputes, it will need a sustained, positive communication program to tell the public where the profession is headed and how it will get there.

The communication ball is firmly in the court of the accounting bodies and accounting firms; it's time to get the message across. In other words, brand building is needed.

HUMAN VALUES 

Most company directors know the importance of credible personal relationships in their businesses. Research has shown that when businesses under attack lose customers, 70 percent are lost because they do not like the human side of doing business with that organisation. This finding can provide the answer for the accounting profession: through better communication it s possible to build a human side of the business (a brand) and get on better.

Good corporations strive to create a brand image that lasts. This "brand" becomes a real asset. Likewise, the accounting profession should recognise that effective communication can offer a powerful brand advantage, too.

Brand advantage does not come from super sales pitches or motivational hoopla. It comes when a company's target market believes that the brand:

* listens to customers, cares for them

* reliably delivers what it promises

* is always interesting by being different or innovative

* wraps up its dealings smoothly and simply

* is happy, and projects this happiness.

These are great human values, yet they underpin most of today's successful commercial brands. One lesson here for all accountants is that communication will improve if more questions are asked and the responses are closely listened to. From then on, being more forthcoming is a positive step that helps the profession demonstrate its interest in others. This is a difficult balancing act for accountants (perhaps even harder for a profession not noted for communication skills), but it reaps rewards.

In the absence of quality communication, a potentially damaging perception gains strength in the media. In the current haze, the media have linked two parts of accounting--auditing and consulting--and decided that this linkage is solely to blame for "poor audits." But does stopping one firm from performing both services for the same client fix the problem? If this change happened, would any of us be closer to understanding what an audit really is?

The media's view is also damaging because it adds to the haze. Perhaps we should be able to see, for example, that the real solution is for company directors to spend more on audits and to widen their scope. After all, the profession has been through more than a decade of cost-cutting on the audit side of business. Instead of seeing this as a problem, the profession stumbles around looking for someone to blame.

If it's decided that more is needed from audits, would investors be willing to pay? Against the current business failures and perceptions of audit failure, the answer would certainly be "no." But many feel that the price of ascertaining a company's financial stability with greater certainty is money well spent. Wouldn't it be a better outcome if we answered "yes" to getting more out of an audit?

The sooner the profession communicates about itself and about audits, the sooner accountants will be able to develop a better approach, if that is what's needed. Meanwhile, the auditing issue is obscuring corporate messages to investors. We seem doomed to confusion and surprise--two words that will drive investors away in droves and leave the accounting profession with a cloudy image.

Stephen Manallack of Toorak, Victoria, Australia, is a communication consultant specialising in financial communication and is the author of "You Can Communicate," Pearson, 2002. He can be reached at 03 9827 9368 or at [e-mail].