I remember the good ol’ days when the JofA published insightful articles like “A Shopper’s Guide to Accounting Software” (Feb.95, page 37), which criticized high-end accounting packages. But these days the JofA is just another cheap rag out there touting its advertisers.

“The 10 Commandments of Mutual Fund Investing” (JofA, Aug.99, page 20) could have been written by an eighth grader, and “How to Select the Right Accounting Software” (Aug.99, page 61) makes the JofA sound like it’s the Will Rogers of the accounting profession—“I’ve never seen a software package I didn’t like.”

The way the JofA’s gone to the pits—you might as well hire Tina Brown to be its editor.

David A. Simon, CPA
Oakland, California

Left out of “l0 Commandments of Mutual Fund Investing” (JofA, Aug.99, page 20) were what I believe to be the two most important pieces of advice:

• In the long run, it is unlikely that an investor will be able to pick a mutual fund that beats the relevant market index. Despite big-name managers and lofty-sounding investment principles, a large majority of managed funds lose out to the unglamorous index funds. Attempting to beat an index fund has a small upside potential and a large downside one.
• Investing in multiple mutual funds, as recommended in the article, lowers risk through diversification. It also virtually guarantees weaker overall performance than the relevant market index fund.

Neil D. Friedman, CPA
Boulder, Colorado

Author’s reply: The argument concerning index funds has some validity, but in only one sector of the equity market—large cap growth. Mutual funds that index the large cap growth sector have done well. However, this is not the case with large cap value, small cap growth, small cap value or international index mutual funds. If index funds are used for those categories, investors would be subject to average or below average performance.

Robert R. Thomas, CFA
Richard Musar, CPA
State College, Pennsylvania

The article “Winning Over Mrs. Fisher” (JofA, July99, page 26) was very disturbing. I believe that, if the AICPA supports this consolidation trend, it is proof of the Institute’s continuing bias toward the larger firms. To support this opinion, I offer the following observations:

• Because many small firms do just a few audits, the cost of having a peer review performed is more than most can bear. It forces them to give up the auditing business even though the small firms can do as good a job as the big ones and, possibly, at a lower cost to clients.
• For the small firms that do government audits, the cost of required CPE can eat up most of the profits earned and make the jobs unprofitable.

Other concerns I have are with the consolidators buying CPA firms:

• Like large discount stores, they go into local markets and drive the small firms out of business.
• If publicly traded companies buy CPA firms, doesn’t that make everyone in the world eligible to own one? The number of people wanting to become CPAs will decrease, and the reason for this—I believe—is that an accountant generally earns the CPA designation to become a firm partner or stockholder. Why bother if one can just buy stock in one of the publicly traded firms and have the ability to sell at any time on the open market?
• How many of the consolidated firms will be willing to pay the higher wages that CPAs require when it may be easier to hire fewer CPAs and more paraprofessionals?
• How can the quality of work be maintained once the pressure kicks in to increase the bottom line?
• How can a CPA remain independent when pressure is applied to refer clients to other sections of the firm for products such as investments and financial planning or to have their pools cleaned and dogs walked?

Consolidations may be the wave of the future in our profession, but in my opinion they’re a sellout.

Kyla R. O’Dell, CPA
Laporte, Texas

The JofA, with its continuously varied, fresh outlooks in articles, seems to get better with each issue.

Two recent articles, “Learning to Love ABC (JofA Aug.99, page 37) and ”Yes, ABC Is for Small Business Too (JofA Aug.99, page 41), were excellent in their emphasis on the importance of breaking down costs by activities to provide better information for managers. However, their enthusiastic descriptions of ABC made it seem not so much a startling new approach as it is the use of decades-old cost accounting basics spruced up with a bright new acronym.

Common sense in cost accounting for efficient results has been essential since the 15th century when Luca Pacioli first practiced the art of accounting. Nevertheless, promoting basic accounting concepts intelligently for modern application is always necessary.

I agree with the observation by the authors of “What’s In a Name Change?” (JofA, Aug.99, page 71) that “profound changes” have affected the role of CPAs. I differ with them, however, over the need to change the CPA designation to one emphasizing “information management” capabilities. Changing names, like changing hats, does little to alter basic capabilities. The authors seem convinced CPAs need to give up their primary attest function, which provides an essential service to our economy and society, and take on a new role as “information consultants.” There is no harm in any CPA becoming a specialized business consultant, but unless the line dividing independent attest responsibilities and consulting conflict of interest is scrupulously observed, the CPA becomes just another seller of consulting services.

The authors favor a change in the profession as well as a change in name. It would seem that a more friendly environment for their proposed name change can be found in several existing consulting associations rather than in the CPA profession. The fact that CPAs often are carrying out more information management responsibilities in dealing with clients does not mean they have abandoned their basic attest function. The CPA has always stood apart in the eyes of the public as having an acknowledged integrity and independence not generally shared by other consultants.

In my opinion, a name change would move the profession in the wrong direction. However, broadening education and work experience to expand a CPA’s scope of knowledge is an advocacy I heartily second.

William N. McNairn, CPA
Palos Verdes Estates, California

Author’s reply: I agree with the observation that ABC is not so much “a startling new approach as it is the use of decades-old cost accounting basics spruced up with a brand new acronym.” Professor Robert Kaplan of the Harvard Business School did not invent ABC—he merely began to apply it seriously.

I disagree with the implication that Luca Pacioli, the father of double-entry bookkeeping, knew about ABC. ABC is in the family of absorption costing. Any ABC system’s design involves assumptions on how to assign expenditures to calculated costs and consequently is styled to reflect a managerial need. I don’t believe Pacioli got too far past a rule that everything should “foot and tie.” That’s OK for the “total” but not for the segments.

Gary Cokins
Bingham Farms, Michigan

In “What’s in a Name Change?” (JofA, Aug.99, page 71), the authors proposed migration away from “accounting” and “accountancy” to “information consultancy” to describe our profession. They write convincingly of the advantageous alignments such a renaming would have for future services.

Although some readers may have been shocked that two career practitioners would propose such a radical departure from tradition, I see much merit in the general idea. Professions have to struggle to keep up with changing times. Sometimes the largest impediment is the success realized in the past and the belief that others see us as clearly as we see ourselves.

My concern is that the article puts the cart before the horse. In the ongoing struggle for accountants to be the primary corporate information experts, we cannot merely rename ourselves and our work. We will have to have the best solutions and the best, most creative people. A new name makes only a small contribution toward getting there. While it is important to believe we are consultants capable of advising broadly about information, it is even more important to have the human capital to back up that belief.

The authors show the logical overlap between auditing and consulting. Although they do not develop the question of how the public interest will be served, they convince us that there is considerable synergy that has not been fully identified. No mention, however, is made of tax practice. Characterizing tax compliance and planning work as information consulting is difficult and leads to a bigger issue.

Whereas a corporate client might appreciate the one-stop-shopping of the information consultant, individuals and sole proprietors are likely to be confused when professionals no longer align with specific services. In short, we need to be concerned lest we “throw out the baby with the bath water” in pursuit of that which we would like to be.

Timothy J. Fogarty
Professor and Chairman
Department of Accountancy
Case Western Reserve University
Cleveland

I was dismayed that the rule “Put duty before self” was listed as one of “The Eight Universal Laws of Leadership” (JofA, June99, page 8).

To state that a person must always sacrifice family, friends and personal interests in favor of responsibility and mission is shortsighted and wrong. In fact, a poll of successful leaders would indicate that always putting work first does not necessarily make a great leader.

A significant characteristic of a successful leader is the ability to effectively promote a work/life balance among employees while still achieving an organization’s goals.

If people lose sight of their personal lives, their efficiency and effectiveness generally suffer. I hope others agree that family, friends and personal interests need appropriate priority in a person’s life.

Douglas E. Horne, CPA
Fairfax, Virginia