As I review my 142 essays from this period, three themes stand out. The world of corporate accounting is in great need of great leaders; the principles of accounting are under much strain because they tend to serve the interests of managers instead of the interests of the investment community; and the attenuation of accounting ethics is in full swing because so little is done to enforce the rules and the principles of accounting or to change institutional features that buttress undesirable behavior by managers, directors, and auditors.

First, there is need for new and real leadership. I recall the leaders of the accounting industry in the 1990s that were so busy trying to engineer new avenues of profit-making and desiring to change “CPA” to certified professional adviser. They thought little of the audits they were conducting, and the rest of us learned just how little when seemingly every public company had to restate its financial reports. Whether the current leaders of the large accounting firms are a significant improvement remains to be seen.

The Financial Accounting Standards Board has had some good leaders and it has had some duds. Let's just say that as long as corporate America has its tentacles on the selection process via the Financial Accounting Foundation, FASB will never become a great accounting institution.

We need good leaders at the Securities and Exchange Commission after the disastrous reign by Harvey Pitt. Early indications on current chairman Christopher Cox are that he has learned from the political miscalculations of his predecessor but has much to learn about accounting and the needs of the investment community. So far during Cox's tenure, the SEC still has made no significant improvement to financial accounting and reporting; worse, enforcement efforts are on the decline.

It would also be nice to find CEOs and directors who cared about their investors and creditors and started providing meaningful accounting reports and disclosures instead of the obtuse tomes currently manufactured. While today's financial reports are much bigger than before, they are designed merely to meet recent criticisms. They actually contain less information than before because so much useless data obscures the real messages. Things won't improve until managers and directors realize that they ought to serve the capital providers.

Second, the principles of accounting may be better than their respective predecessors, but not by much. Lease accounting and pension accounting border on the silly, given the billions of dollars of off-balance sheet debts. (When will FASB ever read and follow its own conceptual framework?) Pooling of interests, one of the great institutional frauds of all time, was eliminated but only at the concession of allowing managers to manipulate goodwill. Special purpose entities remained an unknown until Pandora's Box emptied itself of Star Wars entities, and even now we only have a half-baked solution to this accounting nightmare. And accounting for derivatives remains a joke, albeit a complex and convoluted joke, whose effects one day may explode like a terrorist preying on the financial markets.

The third theme of this column has been to call for greater ethics in the world of accounting. Mostly, however, I see only lip service. When the scandals broke in 2001 and 2002, many said it was just a few rotten apples and now, after Sarbanes-Oxley, many claim that the system is fixed. I disagree on both counts. To fix the system, you need to reduce the incentives to cheat, you need to increase the chances of getting caught when you do cheat, and you need significant penalties when you are caught. Sarbanes-Oxley did increase some of the penalties, but this gesture has no teeth—very few people have been indicted under the Sarbanes-Oxley Act. Congress chose not to examine, much less consider, anything substantive that would reduce the incentives to cheat, and the SEC and the Department of Justice are not enforcing the 1933 and 1934 securities acts to the extent that they could, in part because the funding is insufficient.

Yes, Skilling and a few others have or will be paying for their crimes, but so many others got off. The system isn't fixed when so many accounting cheaters are still out there.

Universities unwittingly contribute to the problem as they too seemingly are insincere with respect to ethics. Last fall I read an article about a software package with which faculty members can detect plagiarism. Administrators at Harvard, Princeton, and Yale do not want the software because they claim their students do not lie or cheat or commit other ethical discretions. With the publicity of the scandal at Duke's MBA program, I wonder what those other programs would say today. Probably the same drivel because most universities do not want to face the ethical lapses in their own camp, much less enforce any violations. At least Duke had the courage to enforce its honor code. Mostly, however, universities do nothing substantive when it comes to ethics. Universities' see, hear, and speak no evil policy is as unconscionable as that in the business world.

During the last century accounting scandals surfaced every 10-15 years. With self-serving business and accounting leaders, defective standards, and a lackadaisical attitude toward ethics, I suspect that trend will continue for a long time. At least my consulting business has a bright future.

This essay reflects the opinion of the author and not necessarily the opinion of The Pennsylvania State University.