Deception, unethical behaviour and complete failure to comply with professional, technical and ethical standards in accountancy is, thankfully, relatively rare. However when it does happen it leaves an impact and can resonate for years. Most large-scale corporate failures are still mainly revealed by one person from within – the whistle-blower.

At the recent US Institute of Management Accountants (IMA) annual conference in New Orleans Cynthia Cooper, former vice-president of audit at WorldCom recalled how her team discovered WorldCom’s $3.8bn accounting scandal, and later assisted the company to emerge from bankruptcy and avoid complete collapse. Cooper’s speech was titled ‘Ethical leadership for the twenty-first century’, emphasising the role that accountants, as ethics champions, should play within organisations.

Cooper’s revelation at WorldCom in 2002 came only a year after Sherron Watkins blew the whistle at Enron, which led to the collapse of Arthur Anderson.

Scandals such as WorldCom or Enron made the US Congress react and pass the Sarbanes-Oxley Act which, for the first time, established audit market oversight in the US.

Almost a decade later, in 2011, the chief executive of Olympus, Michael Woodford, found himself looking at what appeared to be a large-scale accounting fraud and making the decision to raise the alarm and follow the actions taken by Watkins and Cooper.
When Woodford flagged the $1.7bn fraud to the Olympus board he was fired and decided to capture the attention of the world’s media instead of being silenced.

The Accountant spoke to Woodford this month, who explained how the revelation came about and how corporate Japan still has a long way to go before it can safely say there are no more companies such as Olympus waiting to implode.

The question is why hasn’t the global accounting profession learned from the lessons of WorldCom and Enron and why is it still up to whistle-blowers to reveal large-scale corporate failures? The role of the auditor was widely examined in all of the mentioned cases, however at Olympus little blame was placed on their shoulders. Nevertheless, Woodford still wants to hear answers to why the audit process failed to detect decades of financial misconduct.

New editor in town
After more than a year working across both The Accountant and International Accounting Bulletin I’m honoured to announce I’ve taken over as editor of The Accountant. I have learned the ropes from previous editor Nicola Maher, and I’m looking forward to keeping you up to date with the latest developments and interesting insights across the profession.