On Sept. 2, the deadline passed for nominations to the new Public Company Accounting Oversight Board. Created this summer as part of Congress' corporate-reform bill, the Sarbanes-Oxley Act, the PCAOB has five openings. The Securities & Exchange Commission is mandated to fill them by Halloween.
Names as illustrious as former Federal Reserve Chairman Paul Volcker's have been mentioned for the chairmanship, and the law sets aside two seats for accountants. To help the SEC sort through nominations for the other seats, I came up with a brief questionnaire. Take a moment to see if you've got the right stuff.
To each of the following questions, please select the BEST answer:
1. FASB is:
a) An acronym synonymous with failure
b) A group supposed to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information
c) The latest flying disk from Wham-O
2. True or false: I have been an accountant.
3. True or false: I never served any of the Big Five as an attorney, consultant, or lobbyist.
4. True or false: I run my own investment portfolio and make at least six trades per year.
5. "Goodwill" refers to:
a) Where I dump my out-of-fashion business suits and simultaneously cut my taxes
b) The excess of the cost of an acquired company over the fair market value of its identifiable individual assets, minus liabilities
c) All that I expect to win from my fellow Americans by serving on the PCAOB
6. True or false--I am comfortable with each of the following accounting terms:
-- Other-than-temporary declines in fair value
-- Accumulated other comprehensive loss
-- Inverse changes in hedge instruments
7. Conservatism is:
a) Why the Bush Administration was slow to heed calls for reform of the accounting industry
b) The accounting convention auditors abandoned as they chased consulting engagements
c) The kind of accounting practiced in a swath of America running generally west from Toledo as far as Gary, Ind.
8. Wide dissemination of companies' "pro forma" financial results is beneficial because:
a) Stock prices get a boost
b) It stimulates employment in such knowledge-based industries as accounting, investment research, and financial journalism
c) It enables companies to take their "lights" out from under "bushel baskets"
d) All of the above
e) It isn't beneficial
9. SEC Chairman Harvey Pitt recently said: "In the midst of the mounting number of corporate failures, we've also witnessed unprecedented efforts by the private sector to acknowledge problems in the system and try to solve them." This statement strikes you as:
a) Hopeful and constructive
b) A diplomatic depiction of Corporate America's record of self-regulation
SCORING: Chalk up 10 points for selecting any of the following correct answers: 1) a; 2) false; 3) true; 4) true; 5) c; 6) false; 7) b; 8) e; 9) b
-- 0-30: Unqualified
-- 40-70: Potentially Qualified
-- 80-90: Welcome to the Short List
-- 100: Get out--you must work at Andersen!