Public trust in institutions and governance

Accounting Credibility

The accountability failures the United States, as well as other nations worldwide, that led to bankruptcies and restatements of financial statements and harmed scores of stakeholders, including employees and pensioners, had a significant impact on the credibility of the accounting profession. These destructive incidents also resulted in a loss of investor confidence and stock markets to lose billions of dollars. Although senior management and the company's boards of directors were involved in and the leverage for such failures, accounting professionals were blamed for not meeting their responsibilities to shareholders and the public. Improving reputation is not a simple one-shot action, but rather a strategy that involves everyone who is involved in the accounting process from the chairman of the board to contractual workers.

As a result of accountability failures such as Enron, the accounting profession has had to determine the best way to re-establish its public standing. As a result, it is essential to have a wider performance and accountability-reporting model that includes financial statements, as well as other information that allow users to best assess institutional value and risk in the present and the future. Even more critical is to accounting and auditing standards need to be re-examined to provide more comprehensive business reporting. Barry Melancon, the President of the American Institute of Certified Public Accountants (AICPA), stated that "We must restore our most priceless asset - our reputation. We must reach back to our core roots which earned us enormous respect as trusted advisors" (Melancon, 2002). He also called for a rebirth of the accounting culture by analyzing more stringent fraud detection measures and standards as well as greatly enhanced financial reporting.

It is difficult to know exactly what one's responsibilities are if there is not even consistency within the profession as regard to standards. After the incidents that occurred in the corporate arena, the AICPA underscored the need to converge standards. The AICPA agreed to work with the International Auditing and Assurance Standards Board on principles-based standards. Both of these organizations together recognized that the public deserves a certain level of assurance of consistent standards that will be followed in the accountancy field. (Haberman, 2005).

One of the essential factors of accountability that needs to be addressed due to this loss of foundational strength is the standard governance model for public companies. Most importantly, were the boards of directors and audit committees and what were the roles of senior corporate management in these business breakdowns? Such questions are essential to answer to keep similar events to take place again in the future. Audit committees must not only oversee internal and external auditors, but they also have understand complex business matters and, when necessary, call the management on accounting, financial reporting, auditing and other accountability decisions. The role of the audit committee in the future is not only to oversee the financial statement preparation and audit processes, but also other financial reporting aspects, including releases on earnings expectations and quarterly financial reports (Walker, 2004)

Surely through these incidents it was found that management has to play a leading role in encouraging, maintaining and protecting the corporate governance structure, due to his place on the front line. This has to be a top-bottom message where management sets the tone and disseminates it throughout the company. Management must create a cultural environment where ethical behavior and integrity starts in the executive offices and is spread outward throughout the entire organization (Walker, 2004).

As noted above, it is not just the board, senior officers, accountants or policy centers to ensure that ethical standards are followed. It takes all these parties working together. Rezaee, (2004) makes a dozen suggestions on how this can be accomplished at all levels: (1) the accounting organizations need to be more aggressive in addressing the perceived trust gap because the lack of proper action. These leading advocates for CPAs should strive to narrow the trust gap, with anti-fraud education, training programs, and auditing; (2) Big Four, national and local public accounting firms need to be more visible and involved in the business community and the media to demonstrate their commitment to revive the profession's culture and reputation; (3) These public accounting firms must take part in local community activities, particularly those at secondary schools;

4) the need to expand auditing and accounting services to clients, in order to ensure their financial reports' integrity and reliability. (5) Auditors and CPAs should consider several ways that the Sarbanes-Oxley Act and SEC implementation rules as a whole impact accountants and work closely with regulators to address these effects. (6) Public accounting firms need to reconsider external auditors' participation with their client's internal audit function and control structure. This reporting on the internal controls can be very useful and add value to the integrity and quality of the financial reporting process. However, management accepts full responsibility for the design and maintenance of the adequate and effective internal control system. (7) Auditors should advise their clients and make recommendations for the appropriate disclosures of financial information. A more timely, relevant, objective, and transparent financial reporting process should improve the quality, integrity, and reliability. (8) it is necessary to use more effective and objective audit procedures and related standards to improve audit efficiency. The role of independent auditors on financial statements is not clearly defined and understood by the investing public. (9) Auditors need to continually focus on anti-fraud education and training programs for the audit staff and clients. (10) the accountants must assist clients to combat fraud, particularly financial statement fraud, by employing management and anti-fraud programs and controls. (11) Auditors must be skeptical, alert, professional, and inquisitive and understand the public trust in their profession and why they are licensed to serve as auditors. (12) Auditors need to work closely with accounting organizations to improve the timeliness, reliability, and transparency of financial reports.

Finally, in order to rebuild the status of the accountant field, it is essential for more than just today's professionals to learn about ethics and their role in accountability. By the time they are hired, entry-level accountants should have an understanding of what is expected of them and how their own values compare to these expectations. This would include:

Offer student internship opportunities as part of the higher education curriculum. with hands-on experience for optimum learning.

Develop comprehensive practice sets and case-study scenarios with a solutions manual. Many accounting educators do not use traditional practice sets, because many available programs are either outdated or difficult to follow. Comprehensive case-study scenarios with real-world data encourage active participation, communication and critical-thinking skills.

Professional ethics concepts and practical implementation strategies must be integrated throughout the accounting curriculum. Of course, unless these values are reinforced in the workplace, the academic effort will be futile (Kranacner, 2007).

A large number of investors who were burned in Enrons and Andersons were just ordinary U.S. investors who wanted to participate in financial markets. Unfortunately, they had their fortunes and retirements tied up in the performance of the stock market and financial markets. For a while, these investors saw some amazing days. Then it all came crashing down. This is not something that the average person is going to forget. It will take considerable time before the fear passes and people go back to believing in the accounting field.