
The vanished grandeur of accounting - chesterfield
http://www.bostonglobe.com/ideas/2014/06/07/the-vanished-grandeur-accounting/3zcbRBoPDNIryWyNYNMvbO/story.html
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rayiner
This is a really neat article, and I look forward to reading the book. The
field of accounting really is a marvelous and, in current times, under-
appreciated bedrock of civilization. In the course of certain matters, I have
had the opportunity to work with forensic accountants, which is a field I did
not know even existed. Basically, when $100 million disappears from a ledger,
forensic accountants dive in and figure out what happened. It is incredible
the kind of narrative, capturing a panoply of human behavior, that can emerge
from digging through some spreadsheets and associated e-mail chains.

To analogize, imagine spelunking through git commits on a 10 MLOC project
trying to figure out: "is someone trying to insert a backdoor? is someone just
incompetent? is this just the predictable result of a death march?"

~~~
bornhuetter
In practice, forensic accounting is roughly as interesting as archaeology. It
makes for some great headlines in the end, but there is an enormous amount of
detail and bureaucracy you have to dig through to get there.

~~~
hackuser
> In practice, forensic accounting is roughly as interesting as archaeology.
> It makes for some great headlines in the end, but there is an enormous
> amount of detail and bureaucracy you have to dig through to get there.

Perhaps accountants and archeologists would say the same about coding.

~~~
enraged_camel
Coding is a creative endeavor. In contrast, forensic accounting is more
similar to reading code someone else wrote and trying to figure out what the
hell they were thinking when they wrote it.

~~~
lambda
You haven't been coding long enough if you hadn't had projects that consisted
mostly of just that.

~~~
lostlogin
I've done almost nothing and I look at my code and wonder that. Yes, I'm doing
it wrong.

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skywhopper
My wife is an accounting professor and teaches Theory of Accounting at the
graduate level. That's where things get really interesting, because they
tackle all the assumptions underlying our accounting systems. How do you
account for fixed goods, costs in different sorts of manufacturing and sales
models, various forms of compensation, ownership, subsidiaries, taxes, and how
do you reconcile reporting requirements for each country, region, and
municipality in which you do business, which all may have different rules,
along with reporting rules for taxes, which are generally different still, and
with your own internal reporting and analysis needs? Do you specify rules down
to the letter (and allow tons of loopholes) or do you try to enforce the
spirit of the regulations (and leave lots of wiggle room)? How does all this
fit in with other legal requirements? How do you match it up to your business
processes and IT systems? etc etc

There are tons of really interesting questions, problems, tradeoffs, and
philosophy underlying the various accounting systems used throughout the
world, and I'm always interested to hear the various topics she's working up
lessons for at any given time. So this book sounds very fascinating along the
same lines.

~~~
collyw
Sounds an absolute blast!

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buyx
In South Africa, we suffer from the opposite problem: chartered accountants
are fetishized in the business world, far more than MBAs even.

They dominate the leadership of big business and the CA(SA) designation,
especially for a black African is a golden ticket to opportunity and a huge
salary. Our youngest and brightest minds aspire to be accountants, rather than
engineers. It may not be a coincidence that South African business is
sometimes accused of having a lack of flair and imagination.

~~~
r00fus
Given the state of South Africa is a former dutch colony, that seems to align
with the article's historical facts.

~~~
buyx
That's an interesting idea, but it could be a bit of a stretch. Dutch Boers,
later called Afrikaners tended to aspire to be farmers, rather than merchants.
In the last 65 years or so, Afrikaners did move into the big business world,
but that was a nationalistic reaction to the economic dominance of English-
speaking whites.

If I had to hazard a guess, I'd say that the rise of the CA as CEO has to do
with the complex conglomerates that were created during the apartheid era.
Companies had limited expansion opportunities, so they'd use their capital in
unrelated businesses. South African Breweries, for example owned a large
supermarket chain. The focus on the bottom line in these complex conglomerates
rather than a specific business was presumably a great fit for bean counters.
And even though the era of great unfocused conglomerates has ended as
expansion opportunities opened up when apartheid ended, CAs were deeply
entrenched in the corporate world, and the phenomenon of CAs on top has
continued.

~~~
Retric
As a counter argument out of all the C__ officers the accountant is most
likely to actually understand the business. It's not uncommon for companies to
focus on effectively irrelevant part's of their business.

~~~
pcrh
>the accountant is most likely to actually understand the business

This is where conflicts arise... the accountant is most likely to know which
parts of the business are _currently_ generating profit but, depending on the
business, may not be very adept at understanding _why_ certain parts are more
profitable or the longer-term position of the company within its markets.

You wouldn't want an accountant to be CEO of the typical software start-up,
for example.

(I actually partly qualified as an ACA many moons ago before abandoning it...)

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doktrin
Accounting has always struck me as a field that is un-appreciated by the
masses, but valued quite highly by those somewhat more in the know. For
instance, a background in accounting is highly valued in investment banking.

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blm
For the most part the article was interesting. However one thing stood out to
me:

To the audience of the time, the paintings carried a clear message: Mastering
finance was an achievement requiring both skill and humility.

I don't know about humility. I mean having someone paint a portrait of you
seems like hubris. Ensuring that the painting shows you wearing gold rings
does not seem to indicate humility (modesty, humbleness).

Maybe the chosen painting is not necessary of painting from the period and the
others indicated humility.

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CurtMonash
My grandfather's New Year's Eve ritual was to do the accounting for the year
(he was an inventor and business owner). Post Nazi era, he was an engineering
professor at Texas Tech, and replaced the ritual by grading of papers.
Precisely one year before I was born, when he was 80, he did that and then
died in his sleep.

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pnathan
There is a wisdom here, lieing in the English name: accounting, to hold
accountable, to reckon up the debts and mete out justly and rightly.

It's something worth pondering and considering it as a righteous practice.

~~~
pcrh
The origin of the words "audit" and "auditor" is also interesting. The auditor
would receive (listen to) the state of affairs/finances as described to him
and then report that to his master.

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noname123
Hi, any peeps here who are accountants or in finance or just investors who
read quarterly reports and earning statements/balance sheets for fun and
profit in trading?

I used to do it for diversified biotech's with multiple earning dates after a
FDA rejection where the market either dramatically discount or over-inflate
the stock price over the book value/IP of the company.

I know peeps who are also valued investors who similarly do the same thing
distressed assets after a scandal with a CEO or something where the market's
valuation is incorrect when you do the cash flow projections, tangible assets
etc.

Now I trade options based on volatility, so try not to do as much directional
trading. But love to hear some of your guys' accounting wizardry in reading
those balance sheets.

~~~
dbarlett
I don't always understand them, but I enjoy John Hempton's posts:
[http://brontecapital.blogspot.com](http://brontecapital.blogspot.com)

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cdjk
This comparison of double entry accounting and calculus may be interesting:

[http://www.austintek.com/gnucash/ncsa-gnucash-
talk-3.html#ss...](http://www.austintek.com/gnucash/ncsa-gnucash-
talk-3.html#ss3.2)

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pkaye
Accounting seems to something that is easy to offshore. Two companies I've
worked at moved the low level accounting tasks to India and Macao
respectively. Much of it is mechanical in nature and once the grunt work is
done you can have someone local crosscheck it if needed.

~~~
collyw
OK, I don't know much about accounting, but offshoring apparently doesn’t work
well for many software projects. I imagine accounting is the same. Certain
types of work will be suitable, much won't.

~~~
EvanPlaice
You have a valid point but I wholeheartedly disagree.

There was a post on StackOverflow a while back where developers from different
countries commented on the strengths/weaknesses of their home countries in the
field of programming.

Many of the devs from India commented that the caste system had a huge
influence on the types of people who become programmers. Essentially, many
people from families in the higher classes go to school to learn programming
because of the prospective earning potential and pressure from their families
to succeed.

Many of the anecdotes mentioned projects that failed because the developers
working offshore had a tendency to build the projects strictly to the
specification. Despite the fact that the specification was incomplete or
contained assumptions that were later discovered to be false. Ie they built
what they were told to build, not what matched the 'real' requirements of the
project.

The 'average' programmer there has little personal interest in the field and
culturally they're more inclined to respect authority 'do as their told' not
'do what they think is right'.

A true measure of potential in a programmer can be seen in the
willingness/ability to think and approach problems with a high degree of
divergent thinking. To look beyond the rules/limitations of a system and
discover novel solutions to their problems.

Accounting OTOH requires a very high degree of convergent thinking. Meaning,
it's not only expected but absolutely vital for accountants to work within the
bounds of the established laws/policies. There's a very fine line between
creative accounting to increase the margins and cooking the books.

In cultures that put a lot of emphasis on respecting authority and doing
what's expected, accounting may be a better fit culturally. Especially,
compared to cultures that put less emphasis on authority and order.

That's not to say that there aren't talented/passionate programmers in those
countries. There definitely are, they just may not be as prevalent as you or I
may assume; for cultural reasons that we may not inherently understand.

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Amelot
The missing chapters might be found in the book by the author

The Reckoning

[http://www.amazon.com/The-Reckoning-Financial-
Accountability...](http://www.amazon.com/The-Reckoning-Financial-
Accountability-Nations/dp/0465031528/ref=pd_ybh_2)

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Alex3917
Considering that the invention of modern accounting was literally the driving
force behind the renaissance, one has to wonder whether Dogecoin is going to
be responsible for a similar reinvention of society.

~~~
pbhjpbhj
> _the invention of modern accounting was literally the driving force behind
> the renaissance_ //

Go on?

~~~
Alex3917
[http://www.amazon.com/Double-Entry-Merchants-Created-
Finance...](http://www.amazon.com/Double-Entry-Merchants-Created-
Finance/dp/0393346595/ref=sr_1_1?ie=UTF8&qid=1403566096&sr=8-1&keywords=double+entry)

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001sky
This would be perhaps more interesting with a contemporary angle. Has anything
changed in the last 30 years?

 _Today, the internal ethics of accounting have receded from public view. No
one publicly celebrates the virtues of balancing one’s books and of audits
with great art or gripping characters. Occasionally an accounting hero
emerges, bringing a billion-dollar loss to light, but few people appreciate
it, as the Dutch did, as a profound moral advance in business and public
affairs._

This ending is dissapointly shallow.

~~~
jessaustin
_Today, the internal ethics of accounting have receded from public view._

That's _one_ way of putting it.

~~~
001sky
Its not like it went from de Medici to Enron to Lehman without a little
assistance.

There's a much more interesting story about the rise and fall of 'the
prefession', hyper-specialization, commodification, diversification, conflicts
of interest and the (predictable) things that ensue.

The _fundamental_ innovation has long been commoditized. Yet there are also
interesting lessons about the status that accrues to innovation, and the
sociology of commoditized professionals. There are _reasons_ why ethics have
receded from public view and otherwise minimized.

But the seem to escape the author's intellectual grasp or go beyond the depth
of his curiosity.

~~~
jessaustin
To be fair, some chapters may have been left (or edited) out of this summary.
Perhaps they think the more historical parts are more interesting to the
Globe's readers.

Perhaps every profession will be "commodified" eventually, but how do you
assess accountants as compared to say, attorneys or physicians?

~~~
001sky
The reason its an interesting subject is that the professions (eg: law,
accountancy, medicine) were initially set up exclude non-qualified
practitioners for the purpose of limiting competition.

So, at its heart, the idea of being a 'professional' is not congruent with
working in a state of pure-competition, in terms of the basic trade. The
exclusionary structure of the professions was indeed a part of there allure.

This was justified in several ways for many years. But essentially the main
justification(s) revolved around the concept of trust. A person needs to place
fiduciary and/or implicit trust in his lawyer, his accountant, and his doctor.
That is, he must divulge information to each professional which is sensitive--
more specifically, it can be used to harm-- the client/provider of information
in particular. To get the societal benefit of the professional services, it's
crucial that such information flow occur, and that the client (or potential
client) have his implicit trust maintained.

Since this is a complex-contracting problem at a game theory level, the
practical way it was handled was by excluding a great many potential
practictioners. Thus, _the economic & social privledge was provided under the
condition of self-policing to levels worth of such privledge_. This is the
origin of professional 'qualifications'.

So, the passing of the bar exam, or the medical school or financial charter
examps, were the means to provide a structural gate of minimum quality and a
throttle on maximum throughput re: competition from new entrants. This
limitation on competition, not to mention the vulnerable negotiation dynamics
(see: implicit trust), allowed the professions to negotiate "advantageously"
free market rates for many years. This origin in political economy is critical
to understandin the lucrative remuneration dynamics of the professions in a
historical context.

So this at least paints the picture at a level which leads to some light
shining down on a problem we have today.

(1) _The professions are not at all suited (either culturally, or otherwise)
to incorporate un-fettered levels of competition._ In part this is mitigated
by regulation; but other parts remain problematic. Its not just the issues
around abuse of implicit trust. It also involves the sociology of
"exclusivity" and how the cultural changes from commoditization make the
concept of acting "professionally" problematic (either disadvantageous or
otherwise prohibitively costly). However, the "professional" aspects of
rendering "professional services" are critical to their value for greater
society.

(2) _The old ways of limiting competition are no longer capable of limiting
competition_. Nor providing the status boost that being (a lawyer, doctor,
accountant) "professional" once had. The more obvious problem with this is the
feedback loop with #1. The more subtle and vexing problem is how to solve this
in a way that is consistent with "professionalism", whilst at the same time
works from a broader perspective of political economy (ie, does good things
broadly speaking for the structure of society, and the legal/health/busineess
infrastructure that underpins basic civilization.

Hope that helps clarify a couple things.

