Accounting Matters

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Or does it? I’m tempted to question whether the accounting profession matters. (I know that it does, but I’m entitled to some sarcasm.) Why bother with all the work when it all goes to pot in the end? Has accounting theory and practice, hammered about by political compromise, become so convoluted that even the brightest accountants and auditors risk doing their profession a disservice? If accounting matters, why?

WHAT’S THE PURPOSE OF ACCOUNTING?

There’s a fairly simple purpose to accountancy: to ensure trusted (and timely) reporting of relevant information for actionable and reasonable decision-making. Auditing assures that the meaning of what’s accounted for matches the veracity of what’s stated (at least as close as possible).

Accounting and auditing are rooted in these two straightforward premises. Although simple in premise, each can be enormously complex in practice. Furthermore, the theories which articulate the foundation that supports expertise in reporting can themselves be complex. Theory in accountancy is just as critical as it is in physics or chemistry or mathematics. Science, not superstition, is the basement of a sane economy.

OK, BUT WHAT’S ACCOUNTING GOT TO DO WITH ME?

But accounting is more than a theory or a practice: it’s a language.

In order for us to have any conversation about economics or finance or treasury matters, we need our language to be clear and free of corruption. A language, once muddled or corrupted, will corrupt the speakers. It will corrupt the community. So when the language of accounting breaks down, stutters, mumbles and slowly but eventually conveys poetic lies, an entire economic system begins its erosion: what was once a civilization transforms into a dysfunctional family.

Accounting has everything to do with you.

DO WE CARE?

I don’t fully understand the details of the mortgage-back securities travesty crime blunder. I’m guilty of being focused on my corner of the world. Still, I suspect that if we want to understand what went wrong then we’ll need to figure out where along the way the language of accounting, once convoluted or corrupted, generated confused speakers and disoriented listeners.

The purpose of any language is simple: to convey meaning among ourselves. The loss of a language is the loss of an important part of meaning. It’s the loss of culture. Everyday, languages around the world die and we don’t care. The language of the governing brain of our culture is accounting. What do we lose when that language is lost? Do we care? I guess that’s the question facing us today: do we care?

Accounting matters. Language matters. Meaning matters. If we don’t know how to speak in a trustworthy language, how do we expect to send and receive the right signals? How do we know the difference between the right signals and the wrong signals? Signals, of course, mean nothing without interpreters. And that’s why accountants and auditors matter: they are interpreters.

Accountants are the unacknowledged interpreters of the economic world.

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