And the envelope please…
Last night Warren Beatty and Faye Dunaway presented the Best Picture Award at the Academy Awards. Embarrassment ensued. The Guardian said:
PricewaterhouseCoopers, the accountancy firm that has overseen the counting of the Oscars ballots for 83 years, has apologised for the most spectacular blunder in the history of the starry ceremony – when the award for best film was mistakenly presented to La La Land instead of the actual winner Moonlight.
How could this happen? Aren’t there procedures in place to ensure the correct winner is awarded? What caused the mistake? Was it human error? Or the systems themselves that were faulty?
Many were reminded of the shock they felt when it was announced that Donald Trump won the Presidential Election. How could this happen? He did not win the popular vote. None of the major polling firms predicted Trump’s victory. Was there a mistake? Trump campaigned on the theme that the election was rigged. Many times, before and after the election, Trump complained that there were as many as 3 million votes cast illegally.
He claimed that subtracting the illegal votes would give him a clear majority, negating massive fraud carried out by Democrats. Others are concerned that voting systems may have been illegally hacked by Russians. Can the system be trusted?
Is the American voting system subject to human error and systemic errors on the scale that an illegitimate President has been elected? There has been very little comment by those who independently design, supervise, and verify the vote. One of the major players in the authentication of information, or fact, is the accounting industry. Accountants, Certified Public Accounts, accountants of every description should have been insulted by the implications that their work was so shoddy. After all, their entire job is to verify information.
Every accounting student is taught that the job is not simply bookkeeping, or recording of transactions. Today’s accountant is managing information that will be used to make decisions. There is an entire field of study within accountancy that safeguards assets and information called “Internal Control”. When PriceWaterhouseCoopers designed the Oscar system they were using internal control principles.
The Accountants
This year it was Martha Ruiz and Brian Cullinan who posed on the red carpet with their locked PWC briefcases. They were the only ones who held the official results. After years of rigorous study, the completion of years of supervised work and a series of very difficult licensing examinations Ruiz and Cullinan had completed their formal training. They then had to prove their excellence within the company, eventually being promoted to become partners in PriceWaterhouseCoopers. It is one of only 8 major accountancy firms that dominate the international accountancy and business consultancy industry. It was their responsibility to see there would be no mistakes.
With the signatures of the PWC partners Ruiz and Cullinan it was certified that the voting rules had been followed, only valid votes had been counted and that the correct winners were awarded. The procedures PWC designed, in consultation with their client, had the purpose of safeguarding the assets from improper use, and ensuring the reliability and accuracy of the information. PWC and the Academy used the following principles, the same principles that are used by businesses, not-for-profit organizations, and governments everyday.
- Establishment of Responsibilities: Control requires that a specific person is accountable for specific duties. The Oscar ballot counting is assigned to the PriceWaterhouseCoopers partners. For example in a store a cashier is responsible for the till cash balance, a supervisor is responsible for authorizing refunds, a manager is responsible for authorizing purchases. In each state there is a Secretary of State responsible for supervising all aspects of conducting elections. A county clerk might be responsible for managing the county voter list.
- Separation of Responsibilities: To prevent errors and the temptation to cheat a single person should not have both custody of assets and the recording responsibility. They should not have responsibility for related activities. In a properly designed system cheating requires conspiracy. If you think you can get away with something you do on your own you may be tempted. Separation of responsibilities is a strong deterrent to cheating. Each part of the process is documented. There was a small PWC team responsible for collecting the votes, both paper and online. One person on the team printed ballots, another counted them, another checked the count, someone else documented the results. Another person placed the results in the envelopes. The original paper ballots and the results were stored in a locked safe under the responsibility of someone other than the team that had done the counting. The two PWC partners supervised and checked the work of the team and each other. The same should be part of every voting system. A ballot cannot be given to the voter, cast or counted by a single person.
- Appropriate technology is used: Internal Control requires the use of mechanical, electronic and other types of technology to ensure assets and records are kept safe. The locked briefcase is a symbolic, and practical safeguard from anyone trying to interfere with the Oscar voting or revealing the results without authorization. Locks on buildings and safes secure assets, as do passwords on computers, or security camera recordings. The paper ballot seems a low-level technology, but it is well proven as an enduring record of a vote that allows for independent verification and recount. Printing technology, such as that used for currency can embed a wide variety of security features that thwart counterfeit. So too the devices used to store, count and verify all aspects of each voting system. The details, from state to state vary but all Secretaries of State are responsible for appropriate means to be used during elections.
- Internal verification: To ensure internal procedures are being followed an organization should conduct periodic reviews in addition to the continual checking of internal transaction information and reconciliation with supplier, customer and bank records. Larger organizations may have their own internal auditors who conduct surprise audits. Once again, internal controls attempt to verify all information by checking all personnel and procedures in a variety of ways. The internal audit looks for discrepancies and exceptions that need to be reported to top management outside the usual channels. You can be sure that the top PWC accountants are hard at work to find out what went wrong at the Oscars. Similarly Secretaries of State conduct reviews of how voting systems can break down and recommend remedies.
- Other Controls: There is always the risk that unscrupulous employees and managers may be tempted to steal cash or other assets in their control. Examples of other controls include employees being bonded, subject to police checks, drug checks, professional licensing or other ongoing requirements. These sorts of controls are specific to the requirements of the organization. Civil servants and volunteer election officials are sworn to uphold the law.
- External audit: The ultimate internal control is to subject the entire system to periodic scrutiny by outsiders who then report independently to management based upon their professional expertise. Many States do not require voting systems or results to be subject to an external audit.
If you have not studied accounting you may not be aware of how internal controls work and I hope I have given you food for thought. For the past few months I have been shocked that the accountants who have designed, operated and audited voting in the United States have not made public comment on the allegations put forward by Donald Trump and others that the system is rigged. It is a direct criticism of their professionalism.
PriceWaterhouseCoopers has, of course, apologized for the embarrassment on Oscar night, but they caught the mistake as Faye Dunaway spoke. They corrected the mistake before the players left the stage, as was their responsibility. Ruiz and Cullinan, ensured that the correct film received the Oscar.
Accountants, accounting firms and their professional accounting associations need to publically support their work regarding voting systems. The Big Eight need to explain what it means when elections are verified by audit. Is there any more important issue in American politics today? The fate of American democracy is not just in the hands of journalists and politicians. I call upon the American Institute of Chartered Public Accountants to live up to their commitment to serve the public interest. Explain, in a manner better than I have done, that the American Elections are conducted in a manner consistent with generally accepted accounting principles. If you can’t do it then explain what is required. It is part of your duty to serve the public interest. Form a committee, write a report, we’re waiting.
AICPA
The AICPA’s founding established accountancy as a profession distinguished by rigorous educational requirements, high professional standards, a strict code of professional ethics, a licensing status and a commitment to serving the public interest.
