Accounting chicanery will be high on the agenda of the bankers who will meet at the annual IMF/World Bank gathering in Washington, D.C. The IMF should do more than offer the private sector advice about how to fix its accounting problems; governmental accounting tricks and the IMF's own wheezes should also be addressed, says Nobel laureate Joseph Stiglitz.
The Arthur Anderson and Enron scandals in America have focused attention on the problems of accounting in private businesses. But the scale of this corruption should not blind us to the problem of public sector accounting, where many deceitful things are also being done.
Accounting rules are designed to provide standardized frameworks within which the financial position of a firm, or government, can be assessed. Bad accounting frameworks always lead to bad information, and bad information leads to bad decisions, with serious long term consequences. This is true in the public as well as the private sector.
America's business scandals showed how accounting rules can be bent and abused to provide a misleading picture of what is really happening in a company. The Bush Administration, not to be left behind, has shown how public accounting rules can be bent so as to provide a misleading picture of what is really happening in a national economy.