Prepared Remarks to University of Maryland Terp Young Scholars: “The World Needs You”

I want to first thank Dr. Kimbrough for the invitation to talk to you today. The views that I express here are my own and do not necessarily reflect the views of the PCAOB Board or other Board members or staff.

A few months ago, I spoke to 3rd, 4th, and 5th grade students at my daughter’s elementary school about being an accountant. Today I am delighted to speak to you who are closer to considering college about the accounting profession. When I first told my daughter that I would be speaking at her school about my job, she immediately said, “Mom, your job is not that exciting.” I laughed. I was not surprised by that sentiment, but I was determined to make it interesting because accounting is indeed exciting and in fact was crucial to early human civilizations.

Today, I want to talk briefly about the legacy of accounting, the downfall of accounting, and I will conclude with a call to action. 

The Legacy

Would you believe me if I told you that the history of writing began with accounting and auditing? Let’s watch a short video: https://www.youtube.com/watch?v=HyjLt_RGEww

What do you think? The concept of writing began with the need to record agricultural production and exchanges in Sumer, the land of the first real cities. That in essence was the function of accounting and auditing. Interesting to note is that writing did not start with poetry and literature. It started with the need to account for and check commercial transactions! I often hear people say that accounting is the language of business. Now we have learned that accounting has a profound relationship with language in general - it inspired the development of writing. You can share this with your English teachers! 

For centuries, accounting has been crucial to facilitating commerce. In business, counterparties transact with each other, business owners must make decisions to build thriving companies, investors need to understand and trust the information for investment decisions. Everyone needs a common standard to record, understand, and report financial performance. Without accounting, there is no common standard to understand and trust information about the business. That is why at a broader level, accounting plays a vital role in promoting a fair and efficient capital market. 

The Downfall

However, history has shown us that as glorious as the rise of accounting was, so was its downfall 20 years ago. You were not born at that time yet. Two highly regarded companies, Enron and WorldCom, fraudulently hid debts, and inflated profits. Their auditor, Arthur Anderson turned a blind eye. This undetected fraud erased $74B in shareholder value for Enron alone​. The life savings of numerous hardworking employees and investors who had the utmost confidence in the company’s financial position were lost forever.

Recognizing the need to restore trust in auditors and the capital markets, Congress stepped in and passed the Sarbanes-Oxley Act of 2002 (SOX) nearly unanimously. With the enactment of SOX came the beginning of the PCAOB with the mission to protect investors and further the public interest in financial transparency.

What are the lessons learned? Trust is vital to a functioning and efficient capital market. Auditors play a key role in facilitating that trust within the ecosystem. 

Call to Action

Each of you has unique gifts and talents, goals, and dreams. You may not really know what you want to do in the future or how you can make a difference yet, but this is the moment when you can imagine anything is possible. I hope that I have given you a glimpse of the amazing impact accountants and auditors have made on humanity as well as the damage some have caused. Yet the need for innovative, competent, and honorable accountants has never been bigger in this ever more complex world. I am here to tell you that the world needs more accountants, and the world needs you!