To the Point by Jack Bobo
The Enron debacle has, to be sure, cast a pall over the entire business community and, in the process, devastated the accounting profession. Auditors, whose main credibility has always been derived from their ability to be independent and forthright with their clients, appear to have lost ground in both these areas.
Observers in the press offer a variety of explanations for this loss, but in one way or another they imply that clients are able to manipulate or influence audit results more attuned to corporate objectives than accounting standards.
Perhaps it is just a natural result of bigness. A client paying an accounting firm $10 million or $12 million a year for a variety of services holds a large hammer, which may be used to nail down results a smaller client could not demand.
I have no doubt that the Enron experience and a few others of similar nature will have a cathartic effect upon the accounting profession and, in the process, both business and the public will be better served. While much blame has been dumped upon accounting firms, it is important, I believe, that each line of business take a look at its own activities to examine what, if any, of their initiatives may have improperly exploited the reputation of their independent auditors.
That raises the question, at least for purposes of this column: Is the life insurance business in any way vulnerable or perhaps even guilty of questionable practices? I do not have the resources or ability to comment on the main line accounting and actuarial functions of insurance companies, so I will leave that arena to state regulators and others more qualified. However, I do believe we could be subject to criticism in an important area that might not immediately come to mind.
A few years back, the American Council of Life Insurers spearheaded the formation of an organization called the Insurance Marketplace Standards Association (IMSA). Faced with an increasing number of lawsuits from consumers over marketing practices pandemic at the time, IMSA was viewed as a way to correct our marketing problems and reduce litigation against the industry.