Public: Major Auditing Reforms Needed

by David W. Moore

Accountants suffer in public perceptions of honesty and ethics

GALLUP NEWS SERVICE

PRINCETON, NJ -- In the wake of the Enron scandal, a majority of Americans say that the way large corporations are audited requires either a complete overhaul or major reforms, according to a new CNN/USA Today/Gallup poll. While a majority generally express confidence in the reports provided by accounting firms, many of those expressing that view still say major reforms are necessary. The poll also suggests that the publicity surrounding the accounting problems at Enron may have contributed to a decline in the number of Americans who give accountants high ratings for their honesty and ethics.

Conducted Feb. 8-10, the poll shows that 56% of all Americans say they are either very (7%) or somewhat (49%) confident that the accounting firms' reports of corporation finances are accurate, while 42% are not confident (31% not too confident, and 11% not confident at all.)

Confidence in Accuracy of Accounting Firms' Assessment of Corporation Finances

Still, a clear majority of Americans (56%) say that the way large corporations are audited needs either a complete overhaul (17%) or major reforms (39%). Another 35% say minor reforms are needed, while just 4% say no reforms are needed.

What Kind of Changes Are Needed in the Way Corporations Are Audited?

The reason that a majority of Americans can express at least some confidence in auditing firms at the same time that a majority also see a need for major reforms is that many of those who express confidence still say major reforms are necessary. As shown in the following chart, over a quarter (27%) of those who express the greatest confidence in auditing firms still say major reforms are needed, a number that rises to 45% among those who say they are somewhat confident, and to 70% and 87%, respectively, among those who say they have little or no confidence.

Need for Major Reforms Compared by
Confidence in Auditing Firms

Accountants, Business Executives Suffer in Public's Perception of Honesty and Ethics

The current poll included Gallup's standard question from its annual professional honesty and ethics poll. In this case, people were asked to rate these traits for accountants, business executives, and four other types of professionals. The poll shows that fewer Americans give very high or high ratings to either accountants or business executives than they did in November, when the question was last asked. Overall, 32% of Americans now give accountants at least a high rating, compared with 41% who did so last November. Similarly, 16% now give business executives at least a high rating, down from 25% in the last poll.

Please tell me how you would rate the honesty and ethical standards of people in these different fields -- very high, high, average, low, or very low? First, ... Next, ...[RANDOM ORDER]

PERCENT SAYING "VERY HIGH" / "HIGH"

 

‘81

‘85

‘88

‘90

‘92

‘94

‘96

‘98

‘00

‘01

‘02

%

%

%

%

%

%

%

%

%

%

%

Nurses

--

--

--

--

--

--

--

--

79

84

83

Policemen

44

47

47

49

42

46

49

49

55

68

61

College teachers

45

53

54

51

50

50

56

53

59

58

57

Accountants

--

--

--

--

--

--

--

--

38

41

32

Business executives

19

23

16

25

18

22

17

21

23

25

16

Advertising practitioners

9

12

7

12

10

12

11

10

10

11

14



Other professions were included in the poll to provide a standard of comparison that might indicate whether any decline in the ratings of accountants and business executives was part of a general pattern of lower ratings, or possibly attributable to recent reports about the Enron scandal.

As shown in the foregoing table, nurses, college teachers, and advertising practitioners all showed no significant change since the last poll. While the rating of policemen showed a decline from 68% to 61%, the drop is not likely to be associated with the Enron scandal. The November 2001 rating of policemen was unusually high -- apparently a reflection of the favorable publicity that police in New York City received after the terrorist attacks of Sept. 11. The current rating of policemen, while down from November, is still the second highest rating in the past two decades and six points higher than in 2000.

The ratings of both accountants and business executives were about the same in 2001 as in 2000, suggesting that the recent declines suffered by both professions are probably due to news coverage of the Enron scandal.

Survey Methods

Results are based on telephone interviews with 1,001 national adults, aged 18 years and older, conducted Feb. 8-10, 2002. For results based on the total sample of national adults, one can say with 95% confidence that the margin of sampling error is +/- 3 percentage points.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

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