Comments: G30 - Accounting not to blame?

CPAS-L is the largest accounting list, over 10,000 subscribers; professor Bob Jensen has been maintaining this list and a huge website for about 10 years
and invited comment on his paper below....


Conclusions that are lacking in the above report include the following conclusion by Bob Jensen:

Unmentioned Recommendation 1
The accounting profession must develop a strategy and funding to combat white collar crime and tax evasion where it will do the most good in modern times. There are many fronts on which this war can be fought, including the following:
* Commence a major lobbying effort and media blitz to promote stiff penalties that will discourage white collar crime and ethics violations. Instead of lobbying against corruption-preventative like tax shelters legislation, the accountancy profession should undertake an expensive lobbying effort to curb the crimes of their clients and punish the wrong doers in ways that effectively discouraging wrong doing. For one thing, wrong doers should be required to recompense the victims of their crimes for the rest of their lives such that the wrongdoers cannot emerge from bankruptcy and/or Club Fed and live a life of luxury while their victims wallow in poverty.
* Instead of lobbying for abusive tax shelters in Washington DC, all accountancy lobbying resources should be aimed at eliminating tax shelters even though elimination of tax shelters results in lower client fees.
* Commence a major lobbying effort that encourages and rewards whistle blowing both in client firms and in auditing firms.

For more on white collar crime disasters, see

Unmentioned Recommendation 2
Make all persons in society accountable for their resources and life styles. One means of doing this is doing this is to eliminate cash in all economic affairs. Every economic transaction should be accompanied by an auditable trail. A cashless society that is now technologically feasible is one way to start. The accounting profession should commence to seriously lobby for a cashless society.

I guess what I am really trying to say is that the accounting profession will never solve the problems that are emerging without solving the causes of those underlying problems. Medical doctors cannot stop the rising tide of diabetes without devoting their professional efforts and resources to changing life styles, food quality, and eating trends in modern society. Juvenile crime and drug addiction cannot be solved without creating economic incentives to strengthen family values and parental controls. White collar crime cannot be solved without providing genuine preventative measures aimed at the root causes.

Bob Jensen's other proposed solutions are documented at

Posted by Todd Boyle at March 6, 2004 12:32 PM

>I challenge this CPA-L discussion group to modify or add

1. Transaction semantics.

Until accountants agree on unambiguous semantics at the transaction level, there is little hope. Transactions happen between principal parties. Do you call them, parties, persons? or call them by their roles, buyer, seller? This is an example of a few hundred concepts that need accountants' participation and discussion.

Until we get on the same page with descriptive semantics, there is no hope of having an honest set of books, that agrees with the counterparty in exchanges, let alone, honest financial statements. See Bill McCarthy's stuff. and efforts such as UBL, ebXML, as well as newer work of edifact, and x12.

2. Drilldown.

Stakeholders should be entitled to drill down into the numbers in financial statements of publicly listed corporations, period. We need a freedom of information act (FOIA) but meanwhile accountants might lend a hand, ensuring that what is in the financial statements is more objectively tied to the native transaction semantics that arise between the principals in the transactions, instead of our high-fallutin, abstract summary buckets.

3. Externalities.

A good case can be made that today's transaction records are essentially, incomplete. (I would not be so charitable!) A seller of goods or services is rewarded for what they deliver, and rewarded for avoiding and minimizing their costs. Only those persons having some physical power or role to get paid, are paid. Costs to the commons are not paid. Costs to future generations or faraway people, are not paid, nor, the harms or costs inflicted on people who do not have recognized title, within our monolithic global title system, to be paid.

Posted by Todd Boyle at March 6, 2004 12:35 PM

OK, so between Jensen, Boyle, the G30, and myself, what we've shown is that a) it's a real mess, and b) four diverse and presumably intelligent viewers come up with totally different opinions as to what is wrong.

Oh dear!

(FTR, I disagree with both of Prof Jensen's recommendations, unmentioned or not! Todd's: #3 I don't like. #2 I agree with and it reflects a comment I made #1, well... no comment :-)

Posted by Ian Grigg at March 6, 2004 12:41 PM

The range of choices within the full accounting regime is not well understood. Since debit and credits are arranged within predefined choices, the actual coding of them is not the issue.

Accrual accounting - depreciating assets primarily for tax purposes - is not real accounting and thus the terms should be segregated, based, for example, upon the words: Accrual and Real accounting. Real Accounting would be the statement of debits and credits without the sorting process happening (essentially, raw double entry book keeping).

The bland method of Real Accounting takes into account that eventually things will be sorted into categories. When sorted for the purposes of Accrual Accounting, those categories are misleading and therefore must be guided to allow for an accurate portait. The trickery of the sorting within an accrual regime is where the failure occurs, since no credit or debit has any assigned significance aside from what is given to it.

Basically, moving to Real Accounting would remove the time manipulation that Accrual Accounting relies upon. Even though categories for Real Accounting would be different and distinct to Accrual Accounting, they would still need to provide a linkage back to Accrual Accounting since accrual has its role to play in service to the taxing authorities and other government needs.

But, investors require real time accounting, as do lenders. The ability to service debt and earn money are real events, not artifical events created for the tax man.

Posted by Jim Nesfield at March 6, 2004 01:34 PM
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