Attestation Engagement: Is There A Future For “Social Audits”?
When selecting a potential faculty member for our Summer newsletter, Melissa
and I noticed that one department was missing across the gamut of professors whom
we had interviewed to date— Accounting & Information Assurance. It’s not a coincidence
that this was our last field to cover within the Smith School, as it is a bit difficult
to imagine on first thought what might be the possible intersection between social
value creation and accounting practices. Does the role of accountants and CPAs
in social value go beyond the substitution below?
|Assets = Liabilities + Equity
||Assets = Liabilities + Net Assets
In sitting down with Professor Gary Bulmash, he admitted to me that in preparing
for our interview he himself had searched Google for “social value” to find some
subject matter for talking with me.
“The heart of the matter when you are thinking of accounting and social value
is that accounting at its core is a system to track value. The principal question
at the heart of that is first of all, what you are measuring, and second of all,
how you measure it. And that isn’t as clear with ‘social value.’”
That is at the heart of many questions regarding social value, or as the buzz
word would phrase it, “social capital.” Businesses and non-profits provide both
direct and auxiliary benefits to society beyond that which is captured on a balance
sheet, income statement, or cash flows statement. But the question is measurement
of those benefits, be they lower carbon emissions, increased jobs for the difficult
to employ, or even the value of services themselves.
Gary had just returned from a series of academic conferences in the Midwest
and told me that to his surprise, some of these questions of “social value” in accounting
that he’d been wrestling with came up through the words of a lecturer. This particular
lecturer, he explained, had been covering “attestation engagements,” which are often
non-financial subject matters.
What intrigued Gary, however, was the future possibility of such reports to be
applied to social value.
“It’s a good question to consider. For CPA’s, is there a future in ‘audits’ of
social value? What sort of programs would they be involved in? Regardless of how
it manifests itself, I believe it is very possible that ten years down the line
we might have a ‘social auditor’ of sorts. But the efficacy of such a role is contingent
on the internal controls that define an organization’s social value. You would need
to present this ‘auditor’ with a system of standards and measurement benchmarks.”
The difficulty with putting numbers to social value is nothing new to the accounting
world. Gary explained to me that the separate accounting standards for not-for-profit
organizations first emerged in the 1980s, and a principal controversy was the issue
of whether or not volunteer hours should go to revenue and expenses. The final compromise
was to include most volunteer hours as a footnote. This then begs the question of
whether these traditional not-for-profit reports, standing alone, truly represent
an organization’s capital and utilization of resources.
“It depends. Let’s say, for example, I am an organization that gets substantial
government grants. In that case, I would have to file an A133 form to the Office
of Management and Budget on top of the Tax Form 990, and the A133 includes more
diligent standards and reports. But only in that specific case— as it stands, there
isn’t a standard for these organizations. Reporting specificity depends on how you
Is there a future standardized procedure for these questions? Only time will
tell. In the meantime, our conversation turned to lighter topics, and Gary and I
discovered we had both participated in Big Brother-Little Brother programs in our
“It’s so funny to think about, I remember meeting with the social worker involved
in the program when I was mentoring. I literally told her, ‘I’m worried this program
doesn’t work the way it’s supposed to, I think I’m getting more out of this than
my Little Brother is.’”
In closing, Gary also let me know that he has a daughter who is 27, a son who
is 23, and that he has been to Disneyworld in Florida at least 50 times. He and
his family even went last year. And perhaps the most impressive part of this statistic
is the fact that he almost always drives. Let’s hope it’s a hybrid!