On May 15, the Advisory Committee on the Auditing Profession published for public comment its draft report to the U.S. Department of the Treasury. The committee was established last year by Treasury Secretary Paulson “to examine the sustainability of a strong and vibrant auditing profession.” It is co-chaired by Arthur Levitt Jr. and Donald T. Nicolaisen and includes 19 other experts in accounting and related fields.
The draft report makes a number of recommendations, the second of which is to “Improve the representation and retention of minorities in the auditing profession so as to enrich the pool of human capital in the profession.” The accompanying discussion is disappointing, disheartening, and all-too-typical. The committee was created in large measure because of concerns about improving audit quality; it is, therefore, ironic that its draft report should urge measures that inevitably undermine an insistence on hiring and promoting the best qualified individuals possible.
At the outset, it should be noted that, while the term “minorities” is used throughout, this is misleading. Asians, for instance, seem to be doing well enough in the profession — using the report’s own numbers — and there is no suggestion that, say, Jews or Americans of Middle Eastern descent are what the report has in mind either. Rather, it is only African Americans, Latinos, and Native Americans who matter.
The report’s crucial paragraph laments that such minorities “are significantly under-represented” and that this is “unacceptable from both a societal and business perspective.” It declares: “As the demographics of the global economy continue to expand ethnic diversity, it is imperative that the [auditing] profession also reflect these changes.” But why? Apparently because “investor trust cannot be maintained unless the profession itself is viewed as open and representative.”
This is nonsense. There is no moral or economic reason that the accounting profession has to “represent” the world with a politically correct racial and ethnic mix. To the contrary, if a client refused to accept a firm’s auditor because of his or her ethnicity, that would be immoral; and if an accounting firm hired someone other than the best qualified applicant, that would be bad business — for the firm and its clients.
Concluding this introductory call to arms, the report declares “the importance of setting goals and measuring progress against these goals.” That is, it urges racial quotas. Four means to achieve the report’s ends are then elaborated.
First, rob Peter to pay Paul. That is, “Recruit minorities into the auditing profession from other disciplines and careers.” But won’t this exacerbate the “under-representation” of blacks and Latinos among, say, lawyers, which is also always complained about?
Second, lower standards. If, for instance, auditing firms complain that “`individuals who only have associate degrees [from community colleges] typically will not have sufficient qualifications to satisfy state licensing requirements,” then accredit those programs and — presto! — problem solved.