I am, by nature and temperament, somewhat melancholic and a realist. (That probably also describes 80% of the accounting profession). If you need an upbeat pep talk, I’m probably not the guy you want to call. This tendency in my own makeup caused me in the past to answer the title question with a resounding “No.” If people are going to lie, cheat and steal, it’s in their nature and all we can do is work to limit opportunity.

You remember the fraud triangle.

If you have never seen this chart, it’s really useful when thinking about the elements that drive people to commit fraud. Individuals have external and internal events (divorce, gambling problems, greed, sick child, etc.) that create pressure. This pressure, when strong enough, leads to rationalization: “They won’t really miss the money. I’m underpaid anyway. In fact, I deserve it. I’m just borrowing it, and I’ll pay it back.” The last step, opportunity, is the only one that management can control. If the three are present together, misappropriation of assets or fraudulent financial statements are soon to follow.

I have always been pessimistic of individuals’ ability to resist these temptations. Will a single mother with a mountain of debt really not take the cash when it’s sitting right there? Will a controller facing earnings pressure really be able to say no to backdating a journal when the company’s future is on the line?

When the question of whether ethics can be taught was posed on Friday, a participate gave such a good answer that I think he may have actually succeeded in changing my mind. (A small miracle, no doubt). I’m paraphrasing but they said something to the following effect.

“Ethics is the framework by which individuals make decisions. Frameworks and situations can be taught, so that when they are encountered in real life, individuals have already had a chance to decide what they would do in advance. This increases the likelihood they will act ethically.”

I liked this so much, that a colleague and I looked at each other, surprised, and she said, “That’s the best answer to that question I’ve ever heard.” So ethics training, when done correctly, is really a role playing game in your mind. You get to visualize yourself as the criminal without committing the act and resolve not to make the same mistakes. So, kudos to that participant, whoever he was, for wording his answer so well that he changed my mind on an issue that is ever present in our profession.

As far as my plans for this blog, I’m still going to post the odd technical tip as projects come up, but I may shift some focus to current accounting news and people management since that’s where I am spending my time these days. (Write about what you know?) Thanks for hanging with me and continuing to visit.

The most amazing part is even after his conviction Stanford still claims he wasn’t running a Ponzi scheme and the government is responsible for his victims’ losses. Incredible.

One useful function for creating dynamic links within the same workbook is INDIRECT. Instead of hardcoding cell and worksheet references into a formula, INDIRECT allows pieces of a formula to be dynamically updated using variables. Sounds pretty good right? Well, INDIRECT has an Achilles’ heel. It only works if you are linking within the same workbook.

Need dynamic links to a closed workbook? Bill Gates says, “You’re out of luck.”

Fortunately, after searching around, I found an old Usenet post from 2004 by a fellow named Harlan Grove. He wrote an Excel function in VB called PULL which essentially fixes INDIRECT’s fatal flaw and allows the user to create links to closed workbooks. Just copy the code below into a Module within the workbook of your choice. Then you can use the PULL function just like any other.

Example:
A1 =C:\work\
B1 = data\
C1 = [ClosedBook.xls]Sheet1′!$A1
E1 = PULL(“‘”&A1&B1&C1)

'----- begin VBA -----
Function pull(xref As String) As Variant
'inspired by Bob Phillips and Laurent Longre
'but written by Harlan Grove
'-----------------------------------------------------------------
'Copyright (c) 2003 Harlan Grove.
'
'This code is free software; you can redistribute it and/or modify
'it under the terms of the GNU General Public License as published
'by the Free Software Foundation; either version 2 of the License,
'or (at your option) any later version.
'-----------------------------------------------------------------
'2004-05-30
'still more fixes, this time to address apparent differences between
'XL8/97 and later versions. Specifically, fixed the InStrRev call,
'which is fubar in later versions and was using my own hacked version
'under XL8/97 which was using the wrong argument syntax. Also either
'XL8/97 didn't choke on CStr(pull) called when pull referred to an
'array while later versions do, or I never tested the 2004-03-25 fix
'against multiple cell references.
'-----------------------------------------------------------------

End Function
'----- end VBA -----

The Los Angeles Times had a piece this weekend discussing the issue. It was good article, but I’ve noticed something missing in all the coverage. Something that colleges, students and even parents don’t seem to want to talk about.

Not all college degrees are created equal.

Have you noticed that almost all of the protesters interviewed have undefined liberal arts degrees? Where are the chemical engineers or the nurses or the accountants? Working, that’s where. The stark reality is there are more college majors than fields with actual paying jobs.

I never heard this when I was 18. Like most, I was led to believe that just having a college degree was enough. But it’s not. I had to figure it out on my own through a series of missteps and major changes. However, I was fortunate to see the reality before it was too late.

I’m not saying it’s the protesters’ fault.

The higher education system is primarily run by people with liberal arts degrees so it’s natural they give high regard to these fields. However, colleges are doing students a disservice by leading them to believe that simply by graduating with any degree, employers will be knocking at their door. Employers are looking for marketable skills. They don’t care what you know; they care what you can do.

Colleges need to do a better job of informing students about job prospects in their chosen fields. “Oh, you chose electrical engineering. The next four years are going to stink, but you can afford to live on your own when you graduate. Oh, you chose Irish literature. Hope your parents have a spare bedroom.” It sounds harsh, but I wish someone had been that frank with me as an 18 year old. It would have saved me from stumbling around until I found a field I liked AND actually paid a salary.

A friend recently shared this career planning Venn Diagram. It’s funny, but also wise in its simplicity. I think the protesters angry about their student loan debt are well-intentioned but misinformed. As students, we are are told to follow our passions and find our calling, but we are told to ignore money. As these protesters are finding out, that is bad advice. College is an investment, with returns that can be measured. It’s time we started doing a better job informing students about life after graduation.

During the latter half of 1636 Tulip prices in Holland skyrocketed. By the peak of the bubble in February 1637, a single tulip bulb was selling for more than the average laborer made in an entire year. There was a strong belief that tulip prices would only continue to rise. Then, just as suddenly, the tulip market collapsed. Those who had bought in at the top were left destitute wondering where their fortunes had gone.

Sound familiar?

As much as economists would like to explain markets with clean, mathematical formulas, there is a human element that can never be fully predicted. The cycle of booms and busts is linked to human psychology as much as actual macroeconomic conditions. The older I get the more I think the efficient-market hypothesis is a pipe dream and real markets are far more complex and unpredictable than its creators would have envisioned.

A user at Stack Exchange took it upon himself to test whether it worked. He mapped out the various functions and looks like it does. Pretty cool.

Like Enron, they seem to be running their business through a complex system of subsidiaries in order to obfuscate transactions.

One of the funnier quotes from the short sellers’ report is below:

Despite TRE’s opacity on the revenue side, we have overwhelming evidence that the $231.1 million in Yunnan province timber TRE claimed to sell is largely fabricated. Such amount exceeds TRE’s real timber holdings in Yunnan province. It exceeds the applicable harvesting quotas by six times. Transporting the harvested logs would have required over 50,000 trucks driving on two-lane roads winding through the mountains from this remote region, which is far beyond belief (and likely road capacity).

In other words, the amount of timber they claimed to sell in this one transaction not only exceeded their holdings, but the provinces’ road capacity. Oops. They should have sandbagged a little.

Sino-Forest is fighting back today against the allegations. It will interesting to watch this story unfold. Thanks to @bargles for the tweet that piqued my interest.

I didn’t want to lose the edge that a good analytics package offers, so I started looking around for an open source alternative. That’s when I found “R”.

Like SAS, R is a statistics package. It’s designed for statisticians to perform t-tests, calculate standard deviations, and all the other black-box stuff that gives auditors the warm-fuzzies. However, like SAS, it also has strong data manipulation abilities. There is even a package called sqldf, that allows users to write SQL statements in the R command line.

Not surprisingly, because the name “R” is so generic, it is nearly impossible to find good tutorials online through tradition searching. So, I decided it was time to buy a book. Fortunately, Robert Muenchen from University of Tenn, has written a book for people exactly like me: R for SAS and SPSS Users (ISBN-10: 0387094172).

Unlike a lot of programming books, Muenchen’s is packed with examples and real world applications. He walks readers through a particular scenario, then shows how to accomplish with SAS, SPSS and R. It’s like a Rosetta Stone for users needing to move from one language to the other. Overall a great help and I’d highly recommend it.

Jason Calacanis, a well known tech entrepreneur, recently made the following statements about the open source project.

1. Bitcoin is a technologically sound project.
2. Bitcoin is unstoppable without end-user prosecution.
3. Bitcoin is the most dangerous open-source project ever created.
4. Bitcoin may be the most dangerous technological project since the internet itself.
5. Bitcoin is a political statement by technotarians (technological libertarians).
6. Bitcoins will change the world unless governments ban them with harsh penalties.

There are currently a number of exchanges where it is possible to buy and sell bitcoins using real-world currencies. It’s a money launderer’s dream come true; just like anything else using encryption, it’s math, it exists and there’s not much authorities will be able to do about it.