Now being the
winter of our discontent, the political scene in American is dominated by the
rancorous wrangling over health care and insurance reform legislation.
In that context, I
was exchanging notes with my friend the insurance industry risk-manager, over
our recent annual physicals, and fell to musing about the comparability of a
financial statement audit and a personal physician’s examination.
Raise the question
of personal health around a table of the reasonably responsible. The “organ
recitals” of those surveyed will include familiarity with their own particular
concerns – whether blood pressure, good and bad cholesterol levels, resting pulse,
bone density, or hormone levels.
To achieve that
awareness, on a periodic and routine basis, patients are poked and prodded and
invaded in various intrusive and unpleasant ways – they give up samples of
fluids and tissue for laboratory scrutiny, and they are screened and hitched
and wired to exotic and expensive diagnostic machinery
The population of
the diligent will also be subjected to inquiry by their doctors about their
major behavioral risks – does their personal “control structure” include taking
their medications, watching their cocktail intake, wearing their seatbelts, and
avoiding handguns.
And then they
receive several pages of detailed results, calibrated to standard norms of
tolerance, and a briefing on what their trends are and what they might need in
aide of maintaining or improving their well being.
Suppose instead,
along with a bill whose magnitude is itself a threat to good health, the
physician delivers this report:
“We’ve
done a number of tests, the scope and results of which you don’t have, and we
chose not to do a number of other, unspecified procedures.
“We’re
not sure, but we think you’re unlikely to die of natural causes any time soon.
“Thanks
-- we’ll see you next year. Be sure to pay on the way out. And have a nice day.”
Unacceptable – even
with the multiple dysfunctionalities that render American health care an
embarrassment among the world’s developed countries.
Does an audit
report convey anything more about the health of a corporate body?
A company’s
management may be well informed or sclerotic. Its products and strategies may
be world-class, or senescent. It may be the equivalent of a gold-medal athlete,
but with a malign and life-threatening growth lurking or metastasized.
But the only
available opinion is that, within the tolerance of undisclosed measures of
materiality, its financial health is generally fair.
Does the company need the
corporate equivalent of a slimming regime of diet and exercise? Are
prescriptions indicated to bring the basic operational chemistry within
tolerable limits? Something surgically targeted like joint replacement or a
major arterial by-pass? Radical intervention or experimental drugs?
At the cost of
millions of dollars, no such diagnosis is on offer – but only a single anodyne
page, in the same language handed out once a year to every other patient who
passes through the annual audit clinic.
An auditor’s report
tells less about a public company’s health than a doctor’s report tells about an
individual – in scope, detail and precision. And if investors and other
financial information users are not happy, they are doing nothing to make their
dissatisfactions effectively known.
It may be, as Mary
Poppins puts it, that “a spoonful of sugar makes the medicine go down.” But in
the audit environment, patients are getting only sweets and placebos – and
still paying for the dubious privilege.
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