Power Struggles Over Accounting Records? by Guest Blogger Alan Jerry Pan, CPA

I’m on vacation this week, so Alan Pan, CPA, from Beijing Normal University has graciously agreed to supply a blog while I spend time away from work.

Power Struggles Over Accounting Records?

In a move on June 4, President Donald Trump re-affirmed the recommendations from a 1988 working group report on financial markets “to discuss the risks to investors … and financial markets posed by the Chinese government’s failure to uphold its international commitments to transparency and accountability and its refusal to permit companies to comply with United States law.” The timing of the release is potentially muddled by politics, both international and domestic, but highlights differences in PCAOB and SEC regulations and enforcement and Chinese government requirements. The stated purpose of the release was “to end the Chinese practice of flouting American transparency requirements without negatively affecting American investors and financial markets” and “ensure that laws providing protections for investors … are fully enforced for companies listed on United States stock exchanges.”

Read more: https://www.whitehouse.gov/presidential-actions/memorandum-protecting-united-states-investors-significant-risks-chinese-companies/

The fact that the White House is talking about PCAOB and SEC regulations suggests we have a colleague of ours working around President Trump … or an imposter trying to make accounting services workers look like tyrants trying to impose hegemony into a foreign jurisdiction. There are several reasons why the accounts and books we keep require a high level of integrity and, in some cases, protection from prying eyes.

  1. The records we keep provide a map of resource and interaction locations. For every transaction, we are able to identify the source of the transaction and the relocation of resources to another location. This is handy to know if someone asks where an organization keeps its assets and when such assets are expected to be converted. What this map can provide is information on the what, where, when, how and why of the resources we track.
  2. When we collaborate on creating and updating accounts, we work on a mutually shared book of accounts. These shared records are problematic given how much additional political opportunities can be gained or lost when more than one person knows the location of valuable assets. If we are the only keeper of such books, this could be a convenience, but at the same time a risk if someone loses the records of what and where we keep our assets. If we share the books with others, this is also a convenience, but also a risk of leaking information on assets and its vulnerability to access.
  3. The more the value of the books we create and maintain, the more attractive it becomes to control the record keeper. As we continue to construct our books, the records we keep will be increasingly valuable and important to possess. From a small book of a few thousand dollars to a large book of billions of dollars, our records provide information on the location and transactions of what resources, where resources are located, who to talk to, when we can access them, how to do it and why we would use them. Of course, much more strategic information can be generated from these questions and our abilities to answer these questions are not limited to what I list.
  4. As the record keeper and/or tracker, we put ourselves at risk of being dragged into political arenas over the information we possess. A few thousands of dollars tracked in a book may not seem like much, but when combined with other accounts, it could aggregate to trillions. Each worker in accounting services is about as important as the other because we share very similar abilities and skill sets to be able to reverse-engineer and re-trace books, even without the original record keeper. Think what a person of ill intent could do if in possession of records detailing assets that amount to a significant sum of money. Think how valuable it is to obtain information on the location of strategic assets and what people would be willing to do to get such information.

For those of us specialized to provide such services, do we really want to voluntarily increase our danger zone and risks by offering ourselves as political pawns for power? In addition to the records we keep, should we participate in power struggles? For the records we know, is it worthwhile to put our books out in the open to be readable by anyone? Each one of us needs to make an informed choice.

Alan Jerry Pan, CPA
Faculty of Education
Beijing Normal University

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