Why Auditors Should Approach Financial Statements Like Prudes Dressed Like Whores Approach Guys in Bars
Stay with me on this, I swear I have a point. Let's start with my Going Concern column this morning.
Because there is no shortage of criminals (GC):
Over the weekend, I had the pleasure of speaking with Sam Antar of White Collar Fraud. I won’t give him too many props (lest he think his wily criminal charms got to me) but our conversation was both relevant and disconcerting.
In case you aren’t acquainted with Sam, he’s the ex Crazy Eddie CFO who ripped them off and now does speaking tours talking about, well, crime. But there’s a lot more than that at work here, that’s just his schtick.
So what did I learn?
Sam offered up a 3 step plan to "financial reform" that you can find over at GC. Caleb bitches that I use too many words so let me get into some finer points over here where I can ramble as much as I want (yeah I said it, eat it).
First of all, Sam drops F-bombs so I already like the guy. Secondly, when he first approached me he asked me to head out to see one of his presentations at Stanford in March of next year. Awesome, I send out hundreds of auditors into the fun-filled world of CPAland a year so "fraud" is relevant to the shit I'm into. Win.
Third, I'm not sure what the goal of my interview with Sam was going into it but figured as a recovering criminal, he'd probably lead me into the interesting parts and I'd put together the rest later. Fair enough.
Given plenty of insight on the how and why of what he did and what he does now as a motivational speaker, it was our discussion on financial statements that got to me.
He's right when he says accounting graduates are not equipped with the tools to accurately diagnose fraud in financial statements. I know this because I deal with them 7 days a week, talking CPA exam candidates down from the ledge on my BlackBerry and shoving them to complete the exam before the next round of CBT changes take place. This is where the whores come in.
Sam painted an analogy of a bar scene. How many guys lied to me at the bar just to make out with me in my entire life? I declined to answer (exactly) but understood what he meant. Criminals will say whatever they need to in order to get what they are after. Financial statements, in much the same way, will tell the auditor what they want to hear unless the auditor is equipped to deflect false or misleading statements. In other words, the auditor must go into the audit knowing that the financial statements are just trying to get in their pants. Right?
Today's auditor is not ready for today's financial statements. Investors cannot create and invest capital if they do not have a reliable guide (those statements) to lead them. You're sending in a troop of whores to the bar that don't have the practical knowledge to know every single guy in that bar is going to lie to them to get in their pants.
Anyway. Find Sam on Twitter @SamAntar or sit around waiting in those financial statements in a short skirt and someone similar to him will come tag your ass shortly.
Up to you.
Beyond being a potty mouth, Sam also wins some capitalist badge of honor for being one of the last few true capitalists I've seen in a long time. What else do you call someone who plays the deficiencies in a system that no longer possesses the ability to self-regulate to his (albeit fraudulent) advantage? Maybe I finally understand the confusion towards the populist outrage against Goldman Sachs (months after starting with Goldman Sachs 666) on the part of Goldman execs doing "the work of God", if there are holes in the system, it's up to the crooks to find and exploit them.
So the real question here is: whose responsibility is it to give the auditors the game?
I argue if they're going to the bar in a short skirt they ought to know how to cockblock half the bar.