Skipper Sees Another Year of 'Tough Sledding' for Big Tech

Almost all the efforts for reform so far have been more along the lines of putting the fox in charge of the chicken coop -- or the inmates in charge of the asylum, as it were.

They had that guy from TIAA-CREF [John Biggs] that they were talking about putting on the accounting board -- that would've been great. I don't know that guy at all, and I think CREF has been a little bit crazy on their corporate governance stuff. But I'd rather err on the side of caution than having the way things are currently going, which is to pretend that the accounting industry is part of the solution, not part of the problem.

There are several levels of things that went wrong in the accounting industry. The most obvious is that the industry was allowed to consolidate too far. There are just too few firms. Second, they were allowed to build consulting businesses serving both information-technology consulting and financial-accounting consulting that operated in direct conflict with their public-accounting mission. They did this to the point where they effectively hollowed out their audit and tax practices to bolster the profitability of these, shall we say, unregulated consulting practices. And they were aided and abetted in this by FASB.

It would be interesting to get a stack of FASB regulations from the 1990s and see how tall the stack is. Back in 1982, when I started my investment career, the accounting industry was black and white. It was limited, but really clear. Accounting today is needlessly complex and frequently the subject of negotiation. Nothing is black and white anymore.

As a result, financial statements don't mean much. That is really dangerous. The fact that regulators don't see this scares me. The idea that FASB is independent and doing great things is a joke. If you put a bullet in FASB's head and started over, that would be a great outcome.