Accounting For Dummies®, 4th Edition

15.4. Standing Firm When Companies Massage the Numbers, or Not

I majored in accounting in college and, upon graduation, went to work for one of the national CPA firms. I took great pride in my profession. I went on to get my Ph.D. in accounting, and I taught at the University of California in Berkeley and at the University of Colorado in Boulder for 40 years before retiring. I regularly taught the auditing course, which introduces students to the audits of financial statements by independent CPAs.

I always stressed that an auditor is duty-bound to exercise professional skepticism. The auditor should have a mindset that challenges the accounting methods and reporting practices of the client in order to make sure that its financial statements conform with accounting standards and are not misleading. A good auditor should be tough on the accounting methods of the client. An auditor should never be a weak, look-the-other-way, let's-go-along-with-management reviewer of a business's accounting methods and financial reporting practices. An auditor should be as mean as a junkyard guard dog — a true enforcer of accounting and financial reporting standards.

Ideally, a business should select the accounting methods that are best suited to how it operates and stick with those methods over time; its managers should never intervene in the accounting process. Well, it doesn't always work this way. I explain in Chapter 12 that business managers don't always remain on the sidelines regarding the ...