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A hard act to follow D. TRUMPIE PHOTO
As he prepares to retire from the influential Financial Accounting Standards Board, Ed Jenkins reflects on his 40-year career in accounting and on where the profession is headed.
By Sarah Briggs Ed Jenkins’ name is popping up everywhere these days. Considered the most influential voice in accounting today as chairman of the Financial Accounting Standards Board (FASB), Jenkins has been in great demand for media interviews since news of Enron’s financial troubles surfaced last fall. The 1957 Albion graduate has served as an expert resource for Newsweek, Time, Business Week, The New York Times, The Wall Street Journal and many other major dailies across the country, as well as The Financial Times (London). He has been interviewed on MSNBC and CNNfn, among others. Add to that a cover story on Jenkins’ career that appeared in CFO (December 1999) and recognition as one of the top 30 “most influential people in investing” by SmartMoney (December 2001), and you begin to have a sense of his stature in the financial community. It’s not a role he cultivates, however. “I’d just as soon not [be a celebrity],” he notes dryly. The five years he has spent as chairman of the FASB represents the culmination of a career that began in 1958 in the Detroit office of Arthur Andersen. Even then, fresh out of the University of Michigan’s Business School where he earned an M.B.A., Jenkins was called on to give a public face to the rather arcane world of public accounting. He worked closely with the CEOs of what was then Consumers Power (now Consumers Energy) and Michigan Consolidated Gas Co. (now part of DTE Energy) on testimony given before the Michigan Public Service Commission. “Working with clients at high levels as a young person gave me insights into business management and leadership that I couldn’t have gotten any other way,” he says. “I learned a lot from that experience.” Jenkins next headed up Arthur Andersen’s practice before the Securities and Exchange Commission for four years and then became the managing partner in the firm’s Indianapolis office in the mid-1970s. Among the civic leaders with whom he worked was then-Mayor Richard Lugar, who went on to become a U.S. senator. The two have remained in touch and still meet when Jenkins travels to Washington.
In 1976 Jenkins moved to Arthur Andersen’s headquarters and was put in charge of the firm’s audit practice, with responsibility for what was then some 25,000 employees in more than 50 offices worldwide. “It was a tremendous challenge,” he reflects. “I hadn’t had that much experience internationally at that point. . . . I was very fortunate.” He closed his career at Arthur Andersen in 1996 as a managing director for accounting principles. During his later years at the firm, he also served on the FASB’s Emerging Issues Task Force, which identifies and addresses trends in the profession, and he chaired the American Institute of Certified Public Accountants (AICPA) Special Committee on Financial Reporting (known to this day in the accounting community as the “Jenkins Committee”), which issued a report in 1994 advocating a number of fundamental changes in financial and business reporting practices. Today, as FASB chairman, Jenkins leads an independent, non-profit body that sets the nation’s financial accounting standards. Enforcement of those standards falls to the Securities and Exchange Commission for public companies and to the AICPA for privately held companies. “All companies in the U.S. must follow our standards,” he explains. “We have a very important and serious responsibility. . . . In the U.S., we have the most effective and efficient capital markets in the world—and the reason for that is the quality of the financial statements.” Problems like those in the Enron situation occur, he says, not so much because of gaps in the accounting standards but because companies do not follow either the letter or the intent of those standards. “Enron didn’t follow our standards,” he says, “and the result was a lack of confidence in their financial reports. It’s an exception that proves the rule—good financial reporting is essential to a robust capital market. . . . Auditors too have a responsibility. They need to be independent so they can think and act objectively. They must audit to the intent of the underlying standard.”
Ed Jenkins, ’57, steps down this June, both as chairman of the Financial Accounting Standards Board and as vice chairman of finance and business affairs of the Albion College Board of Trustees. From his Albion experience, he says he most prizes his long-time friendship with his faculty mentor, accounting professor Maynard Aris. “Maynard Aris,” he observes, “is the person I owe the most to for my career.” The FASB, Jenkins insists, puts the needs of consumers—not corporations or accounting firms—first. “The focus of the FASB is on consumers—users of financial information, such as investors, creditors and others. We attempt to ensure that corporate financial reports give consumers an informative picture of an enterprise’s financial condition and activities.” Many lessons can be learned from the Enron situation, Jenkins concludes. “In a sense, it is a watershed event for the business community and the accounting profession. I think this should be a wake-up call to follow good business practices.” (continued on next page)
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