Watchdogs . . . or lapdogs?

The New York Times recently wrote an investigative piece about the ratings agencies, particularly Moody’s, and their role in the financial debacle that has befallen Wall St.
Lucifer smiled and opened his gates, I suspect, when Moody’s started selling their services to the same parties they are rating, and did so as part of an ambitious growth plan befitting its new public company status. Since my graduate school days, I’ve always found it ironic that rating agencies, like CPA firms, are hired and paid for by the companies they certify. We’d all be doubled up with laughter if our legal system allowed either the prosecutor or defendant to hire the judge or jury, wouldn’t we?
While I have a lot of respect for my many friends and colleagues in the public accounting profession, and their exhaustive efforts to remain independent, it remains a slippery slope that even the profession itself struggles to regulate. The Enron and Worldcom debacles are noteworthy, and in the ultimate irony, caused the fall of Arthur Anderson, which remains is blemish on the regulatory system that would allow a venerable and distinguished firm to fall at the hands of a few rogue accountants operating out of an office in Texas.
It may be time to recognize these safeguards for what they are . . . well-intentioned professionals doing their best to provide independent opinions for clients that hire and pay them. It’s always seemed to me to be an impossible position, and the recent foibles among the rating agencies only reinforces the point.

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