Old Habits Are Hard to Break

The Evolution of Language

Many have written about the evolution of the English language, which appears to be accelerating. Michael Erard wrote, “Thanks to globalization, the Allied victories in World War II, and American leadership in science and technology, English has become so successful across the world that it’s escaping the boundaries of what we think it should be. … Any language is constantly evolving, so it’s not surprising that English, transplanted to new soil, is bearing unusual fruit” (“How English Is Evolving into a Language We May Not Even Understand,” Wired, June 23, 2008, http://www.wired.com/2008/06/st-essay-23/). It is human nature to resist change, sometimes consciously but often unconsciously, to want things to stay as they “always” were or to do things as one “always” did. Psychologists call this often involuntary form of bias “anchoring.” Hence, people tend to hold on to old words and expressions, often without regard to whether they fell into disuse long ago, or whether their usage has been changed over time so as to become too imprecise to communicate the intended meaning adequately. Some common examples of psychological anchoring to obsolete accounting terminology are inconsequential (for example, “concurring review” or “internal control structure”), but others have contributed significantly to the persistence of the expectation gap. The following three outdated or otherwise imprecise accountingrelated words or expressions (along with several variations thereof) commonly used by CPAs and others in reference to what auditors or accountants are, say, or do contribute significantly to the lingering public misunderstandings about such matters:

• The accounting “industry”;
• “Representing” a client; and
• An auditor’s “certificate” or a “certified” audit.

The Accounting “Industry”

In 2009, Gavin Lumsden wrote: “Language has a powerful effect in shaping our reality, or, as some philosophers would argue, language is reality … it is clear the words we use are incredibly important” (“What’s in a Name? Profession vs. Industry,” Citywire.co.uk, 2009, http://bit.ly/1SD6YmE). There are many online examples of the widespread use of the term “industry” in careless disregard to CPAs’ undeniable status as professionals; for example, an article by Russ A. Prince, “The Future of the Accounting Industry in 2015,” refers uniquely to the “accounting profession industry” (Forbes, Jan. 21, 2015, http://onforb.es/1RSpJCS).

Although one can find many dictionary definitions of “industry,” for most people, the word conjures images of the factories and smokestacks of the Industrial Revolution. A simple definition, typical among those that would appear to accommodate accounting, reads, “a group of businesses that provide a particular product or service” (http://www.merriam-webster.com/dictionary/industry). None of the broader definitions of “industry,” however, convey the flavor of the distinguishing characteristics of a “profession,” which is clearly the preferable term to describe what CPAs are.

Perhaps John Carey said it best when, in 1969, he wrote “the seven criteria which distinguish professions from other pursuits are: 1) a body of specialized knowledge; 2) a formal educational process; 3) standards governing admission; 4) a code of ethics; 5) a recognized status indicated by a license or special designation; 6) public interest in the work that practitioners perform; and 7) recognition by them of a social obligation” (The Rise of the Accounting Profession: From Technician to Professional 1896–1936, AICPA). Certainly CPAs—who are well described by those seven criteria, and whose work is commonly rooted in and guided by the principles of public accountability, integrity, and objectivity embedded in the AICPA’s Code of Professional Conduct and the standards applicable to all services that they perform—deserve and should expect to be referred to, collectively and universally, as a “profession” rather than an “industry.”

“Representing” a Client

Because all client services are rooted in and guided by the principles of public accountability, integrity, and objectivity, it is inaccurate to suggest that CPAs ever “represent” a client. The AICPA’s Code of Professional Conduct speaks of “client advocacy” only in terms of a possible threat to compliance with its independence rule or its integrity and objectivity rule when “engaged to perform nonattest services, such as tax and consulting services, that involve acting as an advocate for the client or to support a client’s position on accounting or financial reporting issues …” (ET section 1.140.010.01). It goes on to state that “some professional services involving client advocacy may stretch the bounds of performance standards, go beyond sound and reasonable professional practice, or compromise credibility, thereby creating threats to … compliance with the rules and damaging the [CPA’s] reputation” (ET section 1.140.010.03).

Nevertheless, expert witness and other litigation support services commonly provided by CPAs are often referred to as “advocacy” services. In its 2013 “nonauthoritative” practice aid, A CPA’s Guide to Family Law Services, an AICPA task force stated that “the CPA should maintain objectivity to protect his or her own reputation and credibility, which is at stake throughout the engagement.” Furthermore, the task force explained how a CPA can provide “advocacy” services without sacrificing the requisite objectivity—even though this would likely impair independence and thus preclude attest service—as follows: “An important distinction between the advocacy roles of attorneys and CPAs is that attorneys advocate for their clients, and CPAs advocate their [own] professional opinions.”

Attorneys represent clients; accountants do not.

An Auditor’s “Certificate” and a “Certified” Audit

During the history of auditing, financial auditors who were tested and found competent to be duly licensed in the United States by a regulatory authority (since 1896 in New York) have been, and still are, called “certified public accountants.” But the origin of the common misuse of “certified” in reference to the audit process itself or the audited financial statements is not so clear. It is difficult, if not impossible, to find the term used in the archival, regulatory, or authoritative literature. In modern usage, an audit of financial statements is properly and simply called an “audit” (or a “financial audit” when necessary to distinguish it from other, often less robust, kinds of audits), but not a “certified audit.” Audited financial statements are properly called just that, not “certified financial statements.”

At the turn of the 20th century, however, when the auditing profession was in its infancy, audit reports were commonly called “audit certificates” (or “auditor’s certificates”), and they commonly included words like “we certify that.” The term “certificate” is still commonly used in certain regulatory audit environments and in some foreign countries, but is not appropriate with regard to audited financial statements in the United States.

For those who are interested, a detailed historical chronology of the use of the term “certificate” for an audit report within the U.S. professional literature follows. View Sidebar .

The Cohen Commission report includes the following cautionary words:

Such terms as “certificate,” certified,” and variations thereof have contributed significantly (and continue to contribute) to the expectation gap and therefore are to be vigorously discouraged, along with the others discussed above, in an audit reporting context. They cause auditors to be viewed as guarantors, insurers, or issuers of a “seal of approval” because they convey an exaggerated sense of precision and reliability that is inconsistent with key expressions used in standard audit reports issued in the United States (e.g., “reasonable assurance,” “in our opinion,” “fairly present,” “all material respects”).

Misconceptions Run Deep

To illustrate the depth and cause of widespread public misconceptions arising from this misuse of language, consider the following excerpts from an online article intended to educate investors about the meaning and value of an audit report. This article is presented by Investopedia, which holds itself out as “the largest financial education website in the world” and “the world’s leading source of financial content on the web.” The excerpts below are among the more egregious examples of many online misstatements related to this subject:

If this comes from “the world’s leading source of financial content on the web,” is it any wonder we still have an expectation gap?