The Chicago Boys

It was an unexpected pleasure to connect with so many smart Chicago folks at the Compliance Week Conference in DC earlier this month.   

One of the best contacts I made was Scott Taub.  I have to admit that I did not know much about him or his firm, Financial Reporting Advisors (FRA) until recently.  Both Tom Selling and Jim Peterson had mentioned I should try to meet him at the conference and so I trusted the judgement of two of the smartest guys I know.  
During a long, leisurely lunch yesterday at my favorite downtown Chicago restaurant, 312,  I found myself talking to a straight shooter, a Midwestern guy who has decided that it’s best to be independent, objective, and brutally honest in this highly charged, highly political environment.  Since Scott is a former SEC  Deputy Chief Accountant, companies think they’re getting some kind of inside line when they talk to him.  Whether that’s true or not, what they are getting is someone who has seen it all before, twice. 
Although I had written a while ago about the new accounting related business opportunity being exploited by the likes of FTI Consulting (does PwC still have an ownership interest?) and Huron Consulting (Andersen legacy) , FRA was operating under my radar.  Scott told me that their low key approach was by design not default.  FRA is a firm of four partners, all former Arthur Anderson professionals, and a receptionist.  If you want to see the model of how and why a true professional services partnership is formed, I imagine you could look at FRA:
1)Professionals with common interests,
2)Join to do a limited range of work they already know how to do well,
3)With agreed upon levels of risk assumption and shared quality expectations.
Given the thousands of public companies at the bottom of the accounting-related significant deficiency/material weakness pit, I am sure Scott and his partners will have a lot of work to do in the future.  There is a strong need for independent, objective firms that can advise companies on their accounting policies, adherence to accounting standards, and interpretation of issues and exceptions identified by their auditors and the SEC.  
Scott Taub, former acting chief accountant at the Securities and Exchange Commission, … in November 2006 stated that “well over half of the errors that resulted in restatements were caused by ordinary books and records deficiencies or by simple misapplications of the accounting standards.” (Compliance Week subscription needed.)
It can only help when companies improve their appreciation and understanding of how to get their accounting right.  The Big 4 is too often “conflicted out” of providing this expertise by their desire to do audit, tax and/or other advisory services.   Whether the companies use firms like FRA to advise them directly or to train their own internal staff, the long term effect will be reduced costs.  Getting educated about GAPP, IFRS and the rest of the accounting alphabet means you will not be as reliant on your external auditor when dealing with these issues in the future.  
2 replies
  1. Francine McKenna
    Francine McKenna says:

    Done. The technical aspects of this business are not my strong suit. I am interested in any complaints, comments, or questions about anything that does or doesn’t help people see the work.

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