You have to be vigilant when you guard your integrity and your allegiance to the public interests. I have here for you some very famous and now perhaps, unfortunately infamous doors. You may not recognize them, but people who are 30 and older probably do. These are the famous doors of one of the best auditing companies in the world, arguably the best, Arthur Andersen and Company. Now these doors were originally at the headquarters of Arthur Anderson in Chicago, Illinois, and now we are very fortunate to have those in a wide collection of Anderson memorabilia in the Gies College of Business instructional facility. If you're ever in town, I would be happy to show you these and along with other really cool historical documents with respect to Arthur Andersen. And the doors there represent public trust and they also represent client confidentiality. In other words, when you share something with your auditor, you should be able to guarantee that the auditor's going to treat client information in a very confidential way, only releasing it to the extent necessary to render an audit opinion in compliance with generally accepted auditing standards, AICPA if it's a private company, Public Company Accounting Board, PCAOB audit standards, if it's a public company in the United States or if it's global company outside of the US, IAASB International Standards Board Standards. So, one of my heroes in the audit profession is Arthur Anderson himself. He is quoted and you see here him in the background in the backdrop of this slide. He is quoted when a CEO of a major railroad was trying to pressure him to sign off on financial statements that had a material misstatement. He said the following. He said, there's not enough money in the city of Chicago for me to do that and he fired the client. Instead of the client firing him, he fired the client, and that was the brand of Arthur Anderson for the longest time. It was the auditor auditor's auditor. Now unfortunately, and I can provide some readings are related to this as supplementary material, if you're interested, what happened to Anderson very much appears that some greed, basically some greed sort of took root in that organization and they lost their way, and that's one reason that Arthur Andersen no longer exists. If you talk to very senior partners, one is the late and great, Art Wyatt. He would tell you, that what happened is that the auditing partners became beholding to the consulting partners at Arthur Andersen who made more money, and there was a bit of a fight about turf, but they started looking at marginal cost equalling marginal revenue and forgot the principle of integrity. So, that's a lesson. You can be high integrity organization today, but unless you are vigilant you can lose that reputation very quickly. So, let's drill down just a little bit more on incommensurable goods. Auditors do get paid and they do get paid quite well. I think starting salaries for the longest time have been well above 50,000 even above 60,000 in US dollars in different cities, depending on where you're at, and it could even be slightly more than that. But more than that, you're going to be expecting to get a doubling of that salary probably every 6 or 7 years maybe even 5 years in certain cities if you stay in the profession. So you're not going to be living in a poor part of town. You're not going to be making the kind of money that a hedge fund manager would make, but you are also deriving benefit from knowing that you're creating value for the public interest. So, your motivation should be intrinsic at the core. You're trying to help financial statements be presented in a representationally faithful, reliable and relevant way to users of financial statements helping our capital markets. Auditing has stood the test of time, the idea that having an independent knower who has integrity and who is only interested in the truth and so far as it can be determined and objective answers, it has stood the test of time. It's been around since ancient Mesopotamia. People like to joke that it's the second oldest profession, but as a profession is not quite 200 years old yet. So when you think of the big accounting firms, you can think that these are the firms that you see today, the modern firms today, actually had their seeds in modern auditing not quite 200 years ago. So, just like Arthur Andersen, as a profession, just like Arthur Andersen as a particular highly regarded firm, the profession itself must be vigilant in guarding its value proposition, which is fundamentally to pursue the truth and to state the truth in ways that are clearly adequate for the circumstances at hand. So, you don't go spilling the beans on client confidential information, but if there's a footnote disclosure that needs to be more crisp and articulate to be objective and representationally faithful, you got to call management do the math and have them do that. If management says no, you walk away. That can be painful because you will lose a client you probably won't collect the fee. So think of yourself as a public watchdog if you are an auditor and you therefore need to be alert for distortions caused by greed. There's a very very good book and I even have an interview for some of you to check out by Mark Jeffers. He works for an organization now that he helped found now called Audit Analytics, it's a big database company. But before that he has a very interesting story to share with you I won't repeat it here about his life as a public accountant particularly working for a private company in Australia. He faced some ethical decisions right out of the gate and made some hard choices. So, let's talk a little bit about the nature of the services that CPAs perform. These services that CPAs perform are professional services. These are all services requiring accountancy or related skills perform for a client including accounting, audit, tax bookkeeping, management consulting, litigation support, business valuation and so forth. What's interesting about auditing is that it's one of the few, that and attest, that actually require the independence of the audit professional. If I'm just doing management consulting, I do not have to have independence from management in order to deliver that service. So, as a result of this need to protect our capital markets, the Securities and Exchange Commission together with professional associations like, the American Institute for Certified Public Accountants, have set forth in writing a set of professional responsibilities for all auditors and accountants who provide professional services to the public, their clients, and to their colleagues. So, among these services, and I'm going to go through a number of these for you and you should be very familiar with these. This will be helpful to you not only in the profession that you're about to enter, but also when you sit around to take the uniform CPA exam. I suspect that many of you will go on to try to take that exam, which is the benchmark hurdle on the technical side for getting into the profession. So, one of the overarching professional obligations you would have as an auditor is to cooperate with other auditors, so that the public interest can be advanced. One example of that, suppose you lose an engagement and that company you are auditing picks up a different audit firm. Will you just say to that successor audit firm, you know we are going to be completely silent, even with the client's permission, we are just not going to share anything we know about this entity. You can't do that if you're going to be a CPA. There's actually audit standards about communications between predecessor and successor auditors which is a really good example of how CPAs must cooperate.
