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Why Traditional Fiscal Accounting Is Content-Free
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by Laurence J. Kotlikoff, Professor of Economics, Boston University and Research Associate, The National Bureau of Economic Re
Dec 04, 2007
New York
Why Traditional Fiscal Accounting Is Content-Free
It’s an exceptional honor to address this IFAC World Accountancy Forum on Government, the Accountancy Profession, and the Public Trust. I speak at a time of great financial turbulence and economic uncertainty, much of which reflects failures of accounting, if not specific failures of accountants. The subprime lending crisis reminds us yet again that financial markets are extremely fragile and can easily lose their moorings when investments certified as highly safe turn out to be extremely risky. No accounting is perfect and no accounting will deliver economic certainty and financial tranquility. But we play a very dangerous game when we rate junk bonds as triple A, rubber stamp Enron-type bookkeeping, and blithely ignore national insolvencies. The “we” here includes economists, analysts, actuaries, regulators, credit raters, bankers, financial journalists, and, yes, accountants. Given our training and professional certifications, we are all fiduciaries, either explicit or implicit, when it comes to overseeing the finances of business and government. The world relies on us to keep financial score on a completely honest basis and to blow very loud whistles when we see financial malfeasance, no matter its source.
** Video recordings of the IFAC World Accountancy Forum are available.
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