What Do They Do?
Managers hire accountants as reporters. Accountants divide the money they watch into categories called "accounts" and report where money has been spent and what remains. The list of categories is called the "chart of accounts," and much good and much harm can be produced by a properly designed chart of accounts.
To some degree accountants follow tradition, which they could change if they wished, and to some degree they are forced by law to obey a rule-setting organization called the Accounting Practices Board (APB). The federal Securities and Exchange Commission (SEC) and the various state corporation commissioners also do rule making. The accountants' topmost reports to your management, and to the public if your company is a public company, are called the "profit and loss statement" and the "balance sheet." The categories in these documents are rigidly defined by the rule makers.
One of the sins of the current rules is that profit and loss are reported and announced quarterly with little discrimination between real losses and expenditures made for long-range profits. Guess how this practice motivates managers who are judged on these quarterly reports.
The second category of report which the accountants must produce, by law, is the computation of taxes. This report, to a large degree, is an interpretation of the profit and loss statement. Such interpretations permit considerable leeway to the accountants and offer an invitation for what that fraternity refers to among themselves as "creative accounting."
Accountants are reporters like journalists and, like journalists, commonly recite the raw facts with reasonable correctness but without understanding. It is this lack of understanding and poor interpretation of the facts which is a principal cause of conflict between engineer and accountant.
Another major source of friction, neglect and inaccuracy on our part in presenting the accountants with the correct numbers, is pretty hard to defend. We engineers should take such reporting as a necessary evil and do our duty.
Throwing Their Weight Around
Like everyone else, accountants like power. This shows, in an entertaining and harmless way, in their use of the word "controls." The explanation is that "control" is accounting language for "report." Reporting money facts is precisely what accountants are supposed to do.
Another way that accountants, successfully, reach for power is in influencing management decisions with concepts of "burden" and "overhead" as real and intrinsic percentages of productive costs and persuading managers to act with these concepts in mind regardless of the reality of their relationship to the real world.
Yet another way in which accountants exercise power is in the design of business forms and procedures, such as expense reports, requisitions, etc. Accountants really believe that, if you divide your expenses into travel, car rental, airfare (all different), hotel, meals, etc., tabulate by the day, add each day's expenses vertically, add the categories horizontally, add the category subtotals vertically, add the day subtotals horizontally, and come out with the same number in the lower right-hand corner, it proves you didn't cheat.
One of the worst things these people do is to persuade managers to institute a conspicuous "overhead" cost reduction at the invisible expense of increasing the cost of the real work. The category of engineering called "industrial engineering" includes a study of accounting by people also educated in engineering.
Auditors
Auditors are accounting police. They search for errors by other accountants in following accounting rules, and they search for fraud by everyone from the company president down. Junior auditors check your time cards for inconsistencies and wish they could check it for truthfulness, but they suffer some restrictions on this side of the iron curtain.
Auditors are used to police the costs of subcontractors who are paid on a cost-plus basis. A public company is required to protect its stockholders from fraud by hiring an independent certified public accountant (C.P.A.; i.e., an accountant licensed by the state) to audit its accounting records ("the books") and its physical inventory and to write an "opinion letter," which is printed in its annual report. Audit by one of the Big Eight C.P.A. firms adds prestige to a company and increases stockholder confidence in the honesty of its managers. C.P.A. companies also provide consulting services and sometimes represent clients in merger and acquisition deals.
