Does Canadian accounting suffer from groupthink? asks a recent Canadian Accountant article by Al Rosen
The regular reader of this blog may immediately be expecting a further recitation of the ways in which I don’t agree with Rosen (as most recently executed here). But actually, on this occasion I’m going to downplay the aspects of the article I mostly don’t agree with, to focus on those with which I partly do. Here’s how he paints the landscape:
- The expression “birds of a feather flock together” is especially significant at this time for users of financial statements, regulators, auditors, corporate directors and accountants. Psychologists and psychiatrists have long addressed the shortcomings of human resistance to diversity, alternate or opposing points of view. Adhering to false beliefs should be avoided wherever possible, especially in the accounting profession, which I believe suffers from “group think,” a psychological phenomenon that occurs in which the desire for harmony or conformity in a group results in an irrational or dysfunctional decision-making outcome.Auditors and lawmakers currently suffer from this unwise behaviour; the very reasons for the century-old foundational existence of financial reporting have been abandoned in Canada.
- Familiarity, unfortunately, reinforces people’s tendency to believe that they are “doing the right thing.” When others who are associates are thinking and behaving like you, further “oneness” of behavioural reinforcement occurs. Brainwashing is amplified when those around you “spout the party line,” despite blatant defects and restrictions that are obvious to others. All of us carry such favourite ideas and biases, according to plentiful psychologist research.
- In the 1990s, Canada’s auditors embarked on a supposed new, but destructive, path of adopting choices that repeatedly appeared then and now to lack wisdom. Student auditor training, for example, abandoned 30-plus previous years of attempting to link user decision needs to information reporting. Showing students the worth of one or maybe two accounting choices over various others helped to provide greater auditor information value for readers of financial reporting. Financial reporting thus had a clear purpose prior to the 1990s; it was primarily for investor and creditor decisions and evaluations. ..
- The combination of robot-like on-the-job training directly conflicted with misleading student recruiting ads. Lurking in the background was a peculiar desire to increase the numbers of registered accountants, mainly for political lobbying purposes. The number of students passing entrance examinations significantly increased. The behavioural narrowness flied in the face of diverse dialogue and thinking that could attract “new blood” with worthwhile ideas for a changing future within business…
The adoption of IFRS, as Rosen sees it, is the ultimate bleak outcome of this sad history – “Demanding loyalty from subordinates to support dangerous IFRS is only one example of encouraging increasing disrespect for financial reporting.” Well, as I said, I don’t agree with all of it. But, like Rosen (and without necessarily agreeing with the specific way he sets out the history) , I’ve also felt that the accounting profession has become less intellectually diverse over the years (even as it becomes more so by various other measures) – for example, entrants are far less likely now to come from an arts background, or otherwise to arrive as late bloomers (I studied film and philosophy and never even thought about accountancy until I was approaching graduation – it’s very unlikely that I’d find a way into the profession now, with such a background and mentality). For me as for him, this may be in part just unreliable rose-coloured nostalgia, but I also recall a time when, in the absence of anywhere near as much detailed accounting literature, financial reporting was a more conceptually vibrant exercise, less dependent on parsing the nuances of standards. It’s possible to imagine an alternative IFRS-driven environment that preserves those past strengths – where the standards are truly principle-based frameworks for engaging progressively with how best to identify and meet the needs of stakeholders, rather than, as they currently tend to be, grueling, largely materiality-resistant listings of things you have to do.
Some passages of Rosen’s article are rather amusing, although I’m not sure to what extent that’s deliberate, as in his blasting of the “glorified misrepresentation” found in Canadian accounting magazines and publications: “Frequent advertising displayed images of glamorous audit students flying in helicopters and holding important roles.” As opposed to, perhaps, images of audit students eloquently denouncing IFRS? He also provides a means of “easily test(ing) the intellectual strength of auditors and accountants in Canada,” as follows:
- Pick a couple of sentences from this column involving inflexibility and read them to your colleagues. A quick rejection could easily demonstrate no more than mirroring your hasty opinion or it could demonstrate an unwillingness to consider any worthwhile counter-opinion.
I’m not sure the workings of the test are entirely clear there, but one has to admire Rosen’s certainty that intellectual strength is best measured through an individual’s reactions to his own writing. In a similar vein, he seems certain that appropriately-selected and -trained members of the accounting profession would all stand against IFRS, while being blind to the irony that this would apparently only constitute its own alternative kind of “groupthink.” So as I said, I might share his broad point about the desirability of a bigger tent, while holding a different vision of what would likely transpire inside it. But then, if I agreed with him on everything, how would I know I was still flying with my own feathers…?
The opinions expressed are solely those of the author