March 3, 2017

Winners and Losers

Winners and Losers

The origins of the accounting profession can be traced back to the 1400’s in Milan, Italy, when Luca Pacioli, described by some as the “father of accounting,” created what became the backbone of modern day accounting, the double entry system of bookkeeping.

In 1896, Frank Broaker became the first Certified Public Accountant in America.

In 2002, accounting firm Arthur Andersen, once the standard-bearer of the accounting profession, was indicted for obstruction of justice and went out of business, as a direct result of actions primarily taken by David Duncan, the lead Andersen partner on the Enron audit engagement.

Denis Field, the former CEO of BDO Seidman, was indicted in 2009 (and later acquitted) in a scheme involving the sale of phony tax shelters.

And now we can add Brian Cullinan to the list of the famous and infamous in the accounting profession.

Unless you’ve been living under a rock, you know that the accounting profession was rattled by yet another scandal this week, when Mr. Cullinan, a partner at Pricewaterhouse Coopers (PWC), one of the “Big Four” accounting firms, unwittingly handed the wrong Academy Award winner’s card to Warren Beatty, the co-presenter for the last and biggest award category of the night, Best Picture. As we all know by now, Beatty apparently froze, realizing he had the wrong card in his hand. Faye Dunaway, his co-presenter, jumped in, saw “La La Land” written on the card, and not realizing it was a duplicate of the card for Best Actress, which Emma Stone had just won for her performance in “La La Land,” announced “La La Land” as the winner of the Best Picture award.

It took almost two minutes of chaos before Jordan Horowitz, a producer of “La La Land,” was able to get to the mic to announce that, in fact, “Moonlight” was the real Best Picture winner and that a terrible mix-up had just occurred. It was subsequently discovered that rather than paying attention to his job, Cullinan was busy tweeting pictures of Ms. Stone, with her own recently acquired Oscar, moments before his fateful mistake.

Being the managing partner of an accounting firm, I’m not at all enjoying the pain that the management of PWC must certainly be experiencing this week. As a matter of fact, I realize what happened to PWC could have happened to any firm.

PWC’s relationship with the Academy of Motion Picture Arts & Sciences goes back over 80 years and involves much more than just tabulating votes for the Oscar broadcast. PWC is the accounting firm for the Academy and handles their financial statements, their taxes, their consulting. It’s a trusted, long-term, mutually beneficial relationship, much like the relationships Marcum has with our clients.

The actions of Andersen’s David Duncan 15 years ago and some of the people around him led to the swift downfall of one of the greatest firms our profession has ever seen. While perhaps an early (in)voluntary retirement might be in store for Mr. Cullinan, the entire 80-year relationship between PWC and the Academy shouldn’t come down to a single error by a single individual.

We at Marcum pride ourselves on having long-standing trusted advisor relationships with our clients. We intend to do things right all of the time, and most of the time we get it right. Every once in a while, something happens, usually not intentionally, where we fall short of a client’s expectations. Most of the time, the bonds of strong, long-term relationships help smooth over the rough patches and keep our clients as our clients. We get a second chance.

Now, I’d be lying if I said I wouldn’t take the call if Academy President Cheryl Boone Isaacs reached out. But PWC deserves another chance. They’ve served the Academy well for over 80 years. 80 years! One misstep shouldn’t be the defining moment in an 80-year relationship.