by Cathy Lockman
How do you sum up the changes in the accounting profession over the last 40 years? Jim Cook, a partner with Ernst & Young, and his daughter Pam Cook, a senior audit associate with Deloitte, took up that question at the recent Department of Accountancy Lyceum. And one eye-opening way they demonstrated the differences between 1970 and 2010 was by using some very telling numbers from Ford Motor Company’s annual reports. They shared with the students that the 1970 report had 36 pages compared to today’s 171; the management and discussion section, which was 1 page at the time and wasn’t even required, is now 55 pages long; and notes to the financial statement, which covered only 3 pages in 1970, had grown to 84 pages in the most recent report.
“What did you do all summer, Dad, when you didn’t have Sarbanes-Oxley, and you only had three pages of notes to worry about?” Pam jokingly asked. “We thought we were busy,” Jim told the audience. “We were writing everything out and doing the calculations in our head,” he added tongue in cheek.
The Cook’s presentation provided the Lyceum attendees with an engaging look at the past four decades in accountancy, a time marked by globalization, regulation, and technological advancements that have left a lasting impact on the profession–from the very number of public accounting firms in existence to the increasingly litigious professional environment to the tools auditors use to do their jobs every day.
It was a unique opportunity for accounting students to hear from two generations of University of Illinois graduates. Jim graduated in 1971, the year the NASDAQ opened and two years before the Financial Accounting Standards Board came into existence. He has seen the profession change in size and scope from the creation of consulting practices in the 1980s and 1990s to the divestment of those same practices in a decade’s time, from periods of robust economic growth to perilous financial times, and from a largely self-regulated profession to a regulated one. Pam earned her B.S. in 2007 and her M.A.S. in 2008, six years after the adoption of SOX and the creation of the Public Company Accounting Oversight Board. In her experience, both as a student and a professional, accountancy has always been global, team-oriented, and regulated.
In addition to the historical perspective their experiences provided, the pair shared their thoughts on what lies ahead for the profession as well as advice about what students can do to best prepare themselves to be successful.
“Today’s auditor spends much more time looking into the future than we did 40 years ago,” said Jim. “For the most part, our work was a backward-looking exercise. Now there are greater expectations on the auditor to consider the future in terms of impairment, fair value, and valuation accounts. The responsibilities of the auditor have increased significantly.” He told the students that today’s auditors should be prepared to acquire specialized knowledge to meet these increasing responsibilities.
“It’s important to have at least a basic understanding of how actuaries go about their work because actuaries can have a significant impact in valuation assumptions such as goodwill,” Jim said. In addition, he suggests that auditors deepen their knowledge in a client’s sector or industry in order to be truly effective. “I am a proponent of industry specialization. I think you should develop credentials for an industry or two, especially the financial services industry because of its unique structure. But that’s also true for other industries, such as automotive and biotech. You need to be able to talk with your client about their industry.”
Pam agrees that communication is extremely important as a staff auditor. “Because we work in integrated global organizations, we have more time to think strategically and employ the power of the team,” she said. “I spend 50 percent of my time working by myself, and the other 50 percent collaborating with others on my team. It’s important not only that I communicate my questions clearly for the engagement team but that I demonstrate that I’ve thought through my questions before asking my team for help. When working directly with a client, that same emphasis on communication is essential. I should know my end goal in asking a client a question, and I should clearly communicate my reason for asking it.”
Pam also shared some additional advice from her own on-the-job training, telling students to: demonstrate a willingness to learn, maintain a positive attitude, communicate personal career goals, and turn “easy” assignments into an opportunity to learn. In addition, “trust your gut and your ideas,” said Pam. “Have confidence about your abilities and know that your ideas are credible.”
Jim told the students that they’ve already taken a most important step in establishing a successful career–choosing ILLINOIS for their accountancy education. He pointed to the leadership the University has provided for the profession, including the work of R.K. Mautz, a former ILLINOIS auditing professor who was a leader in the efforts to develop audit committees. “In the early and mid-70s, very few companies had audit committees,” Jim explained. “The establishment of those committees raised the stature of the role of the auditor because it gave us a stronger connection to the boards of our clients. It had a positive impact in our relationships and in the communications between the auditors and the companies.” He also described Mautz as “a visionary with respect to internal controls, but it was hard to get peoples’ attention on that issue at the time.”
He challenged today’s students to take the tools of their premier education and continue to provide leadership for the profession. “Just like we couldn’t see what was coming back in 1970, except in the most vague way, you can’t predict what the next 40 years will bring for the profession. But when Pam comes back in 2050 to give another 40-year retrospective, we hope that ILLINOIS accountancy graduates will have been instrumental in some of the major developments that will occur.”