Coffee with Red

Coffee with Red

Recently I had the privilege of meeting with Mr. Red McCombs among other members of the MPA and BBA Legacy Committee. Besides having the School of Business named after him, Mr. McCombs is a legendary entrepreneur and a generous philanthropist. I have always been fascinated to learn the reason behind the philanthropic work of many successful business people, and this was a rare opportunity to hear Mr. McCombs speak in person.

I have heard many great things about Mr. McCombs from other UT faculty and staff, and all that have been said were reinforced when we saw him. Mr. McCombs was very friendly, warm and had a great sense of humor. Before sharing his thoughts on the MPA and BBA Legacy Campaign, Mr. McCombs said he was very happy to hear that a group of current students were working on this campaign. He went on to tell us a story about his family growing up and how that tied in with the philanthropic work throughout his life. Being born in America, especially in Texas with caring parents, he had always felt very fortunate. Every week, his father brought home exactly $24.75 for the whole family; it was not at all much money, but his mom would always take $2.50 to give to their local church. His family taught him giving back was something he truly treasured and decided to continue in his life.

“If you discover the real joy of giving, you will discover the real joy of life”. It is truly inspiring to hear it from a person so successful in his career like Mr. McCombs that giving is such a big part of his life and it brings so much joy and happiness to him.

After sharing his personal story, he urged the Legacy Committee to inspire the commitment to the class among current students at McCombs. He emphasized the importance of class commitment throughout the rest of our lives. I think many of us would agree with Mr. McCombs when he shared the idea that people might part or they might stay best friends after they leave UT, but establishing the habit of giving, especially when it is towards the institution and program that brought us all together is important. He also raised a point about the “I-haven’t-made-any-money-yet” issue among many of us: the amount that each of us contributes is not important, but to get 100 percent participation rate and continue the tradition when we leave UT into the working world is critical. The next thing that Mr. McCombs said was a great surprise for all of us in the room, as he pledged to match up to $5,000 to kick off the Legacy Campaign. To have Mr. McCombs’ support as we continue to spread the word and encourage current McCombs students to give is amazing.

A few minutes before the end of the meeting with Mr. McCombs, we were able to ask him about his secret in having a work-life balance, a topic usually brought up throughout all of our careers, and his answer was straightforward and simple: Family always comes first and when you’re with your family, you have to truly be with them. He closed the meeting with a profound advice: Money itself is worthless; it is what you do with it that mattered. Therefore, to be happy, we need to choose to do something that is meaningful to us and to make a difference in our lives.

I hope that Mr. McCombs’ words would inspire many of you, as it did for me, to start making a difference during and after your time here at UT. Remember, it is never too early to start giving back. The MPA Legacy Campaign is still working towards it’s goal of 100% participation. Like Mr. McCombs said, the amount isn’t important, your participation is. Give to the MPA Legacy Campaign here.

Special thanks to Hoa “Kaylee” Nguyen for her reporting on this event!

“A good judge is better than an unbiased one”…?

Russian judge Shekhovtseva hugging Russian gold medalist... demonstration of independence?

Russian judge Shekhovtseva hugging Russian gold medalist… demonstration of independence?

In case you couldn’t tell by the number of figure skating posts I have written earlier, I follow the sport very closely as a judge.

At this year’s Sochi Olympics, the Ladies Free Skating event was filled with public backlash and drama. This is because reigning Olympic champion, Yuna Kim (or Queen Yuna as some of us like to call her) skated two flawless programs and won this year’s silver medal, missing the gold by a large margin to Russian teenager Adelina Sotnikova.

Fueling the outrage was the apparent lack of independence of the judges and officials of the event, most notably Alla Shekhovtseva of Russia and Yuri Blakov of Ukraine. The former judge is married to the head of the Russian figure skating organization and was the judge seen and photographed hugging the gold medal winner moments after the competition. The latter was formally suspended for trying to fix a result during the 1998 Olympics and allegedly has ties to Moscow.

The Korean Olympic Committee has decided this week to file a complaint to the International Skating Union about an alleged breach of the code of ethics during the ladies competition. The KOC and Korean Skating Union are asking for a thorough investigation for the judging composition and whether it was biased toward Russian gold medalist Sotnikova.

The ISU does prohibit judges from judging in competitive events where they have a conflict of interest, a conflict of interest being defined as:

The term “family” as used in this Rule shall be understood as including all persons, who, due to their relationships, may reasonably appear to be in a conflict of interest position regarding a competing Skater, ineligible person or remunerated Coach.

It could be argued that marital ties to the Russian skating federation falls under this definition, calling into question her independence.

As we all know and can appreciate as accountants, independence is one of the core principles of auditing. A statement attesting to the validity of a company’s financial statements means nothing without some reasonable level of independence. Part of the reason this scandal fascinates me so much is how important the concept of independence can be seen (and ignored apparently) in so many areas of the world, most notably in sports.

With the accounting perception in mind, read the following quote made by ISU President Ottavio Cinquanta to the Chicago Tribune the day after the ladies Olympic champion was announced:

“Would you rather have an idiot acting as a judge than a good one who is a relative of the manager of a federation?…It is far more important to have a good judge than a possible conflict of interest.”

Ummm…what? The auditor training in me is cringing. Imagine if a corporation said this about it’s auditors?

To even become entry-level staff on an audit engagement requires a masters degree and a CPA certification, meaning that there will not be any idiots touching your financial statements. Without independence and people believing your attestation is valid and unbiased, there’s no point. It can’t be relied on.

Competing With Engineers for a Sustainable World

A couple of months ago, we all received an invitation to compete in BASF’s Team Chemistry challenge. A fellow MPA student decided to formTexas-mascot a group, and so I joined. It seemed like a fun project – come up with ideas to lessen the environmental impact of football gameday. I love football gameday and I have an interest in environmental sustainability, so it was like a match made in heaven. Of course, the incentive of winning a bunch of money didn’t hurt.

So, we set to work coming up with ideas on how to approach the problem.  We easily came up with a host of small solutions that would have some impact, but quickly got bogged down in the details. After spending some more time pondering our work, we decided to focus on a group  of related solutions and hone in on them.  As Joel said in his most recent article about accountants being risk-averse, we learned from our initial mistakes, found the proper balance, and ended up with some pretty cool ideas.

We were invited to a couple of events by BASF and the Athletic Department to learn more about the initiative and the goals of the competition. One event was a sustainability panel sponsored by UT Engineers for a Sustainable World. The panel was entirely made up of engineers and the audience was entirely engineers … except two of us MPA students. It was very intimidating hearing about them discussing various polymers of which we had no clue of their existence much less their properties. Apparently these students have a big advantage over us with their knowledge of chemicals, considering BASF is essentially a chemical company. The next event was a stadium tour, during which our guides told us about their issues with waste management. Their focus seemed to be only on waste management problems, while our solutions did little to address that.

ConcoursePoster_#2_Sec120But, we pressed on, confident in the power of our ideas despite not having the technical knowledge that is certainly common among our competition. What we do have is a business ingenuity that enabled us to come up with feasible solutions that are easily implemented and have a measurable impact. We used the skills we have learned in economics, finance, and accounting to estimate the results of our proposals. We also used our branding and presentation skills to develop a persuasive format through which to deliver our proposal.

We find out Friday if we are invited to the finalist round, where we will present and defend our ideas in a “shark tank” environment. We’ve had fun putting it all together, and we’re proud of our accomplishments, but it would be great to get to write a “Part II” to this article about our preparation for the finalist round!

 

MPA Council and the ICAEW: The future of global auditing

icaewIn late February, Program Director Jim Franklin and Department Chair Lillian Mills were able to have some members of the Institute of Chartered Accountants of England and Whales (ICAEW), one of the leading institutions publishing articles about the profession internationally, to come and speak about the future of global auditing with members of MPA Council.

We were asked the question “What challenges do you think the auditing profession currently faces?” and “If you lived on a small island where all the companies did not have to have their financial statements audited because everyone trusted each other. If you wanted to open the island to foreign-based companies, what protections would you put in place?”

The resulting discussion I felt was fascinating, as it combined the knowledge I’ve developed in both my auditing and complexity theory categories. I feel these two questions are extremely related, and here’s why:

Let’s say we are on the small island described above. There is no need for audited financial statements because there is trust between the companies and shareholders. We face the decision of requiring audited financial statements in the face of foreign companies wanting to sell shares on our island because we do not have the same trust in these companies. Auditors would become in demand because of a lack of trust between company management and investors.

If shareholders feel they have been presented fraudulent financial statements, they will blame the auditors for not catching it. Even though it was the company that committed the fraud, the highly-trained auditors did everything they were supposed to do, a disproportional amount of blame falls upon the auditors.

This blame falls on the auditors because most people don’t fully understand the role of the auditors and the work they do. They just expect them to catch all and any fraud. This is what we discuss in auditing class as the expectations gap. Because people don’t understand the training and qualifications we have, and the limited nature of our job, we can only do so much to prevent fraud. Companies preparing the financial statements are the ones ultimately responsible.

Also, auditors are held accountable for the effectiveness of accounting standards. The problem with this is that the world is coming more and more complex, and companies are quickly adapting their operations in order to survive in the complex world. Frequently, we can’t keep up in developing accounting standards to reflect these new and innovative ways of doing business. Technically, a company’s financial statements could be following GAAP, but the core economics of the transactions are misrepresented.

Because of this expectation gap and lack of trust that is continually strengthened by corporate fraud, a a decent amount of people are mistrusting auditors for “not doing our job.”

The answer seems to be to close the expectations gap and to increase people’s trust in our services. The million dollar question, though, is how in the world can we do that?

Recruiting: Interview Week

The crazy week of interviews and pre-interview dinners is past and somehow I have managed to survive. How did I survive you ask? Was it nonstop coffee and late-night studying? Was it doing my hair/makeup everyday (which I usually do not do)? Was it dressing business professional nearly everyday of the week despite the hot, muggy temperatures outside? YES. Despite all of this, it was also an incredible experience. Yes, I admit, it was scary being interviewed by partners consecutively but I feel so much more confident now. And who doesn’t like getting treated to steak dinner every night for a week? No complaints there.

The W Hotel, Downtown Austin

Pre-Interview Dinners

The firms will host a “pre-interview dinner” each night before your interview with them the next day. The dinners will be at a nice place or hotel downtown, such as the Omni or the W. They are usually catered with amazing food and also may include a fun event, such as casino games and a short presentation. At these dinners you will get a chance to speak with your interviewer. This is extremely helpful because it will help you feel more relaxed for the interview the next day. If you can make some good conversation with this partner at the dinner, the same good vibes are sure to carry over into your interview the next day. Also, please do not forget about etiquette at these dinners! You may be nervous and forget which forks and knives to use (hint hint….I did that) but that is OKAY! Remember that nobody is perfect, and you are bound to make a few mistakes here and there. Focus on what you can do to make recruiting successful (clean clothes, good sleep, etiquette) and forget about the stuff that is out of your control (redness, sweating, whatever!). Just keep smiling and know that they really do just want to get to know you!

Interviews

The interviews were my favorite part of the whole week. I am not sure if I am comfortable with one-on-one interactions or if I just had really good conversations but either way the interviews went better than I expected. I am definitely the type of person that gets nervous and shows it, so my first piece of advice is to remain calm. It is not as big of a deal as you will make it out to be in your head. By your last interview of the week, you will be a pro at getting interviewed. In fact, I found myself laughing during a couple of my interviews. The partners are people just as much as we are and they enjoy jokes, too. Bottom line? Just be yourself! Do not undermine the importance of the interview, but also realize that you will be working with these people and they want to make sure your personality fits with the firm.

Things to remember for your interview: unofficial transcripts, follow-up thank you emails, and the right business attire (Yes, ladies that means pantyhose is included!).