Let’s Talk Facts on Accounting Law

A couple of weeks ago The Times published my column calling for reforms of the accounting profession in light of the Enron and Arthur Andersen debacle. Since then, I have received a number of positive responses from California accountants concerned about the image of their profession.

But a few days ago, The Times printed two letters to the editor that blasted my column as containing “false and misleading information” and “serious inaccuracies,” and I was accused of “political posturing.”

Rather than respond with similar rhetorical nastiness, let’s talk facts. First, we need to be clear about the real source of the two letters. One letter is from the current chair of the California Society of Certified Public Accountants (CalCPA), the state’s largest trade association for accountants. The second letter is from the incoming chair of CalCPA. So there really is only a single letter, produced by CalCPA and neatly divided between the trade association’s two top leaders.

The main attack on my facts relates to my criticism of a recent state law that allows non-CPAs to have an ownership interest in an accounting firm. Although this is an arcane subject, the bottom line is that the law creates the potential for serious conflicts of interest.

To clarify the situation, I used the example of a stockbroker who can have an interest in an accounting firm and receive referrals from accountants. The two CalCPA letters pounced on my stockbroker example as being utterly false. They said that such an “obvious conflict of interest” is not possible under the law.

The two top leaders of CalCPA should know better, especially in light of another fact--CalCPA sponsored and successfully lobbied for this law. The reality is that both of their letters are dead wrong.

My facts and example are correct, according to the California Board of Accountancy, which interprets the law. This reminds me of the adage about glass houses and throwing stones--if you want to attack someone’s character based on facts, you should be careful about your own “facts.”

Lou Correa

Assembly member, D-Anaheim