The accounting profession has a long way to go to recover its lost dignity and relevance, but the turnaround has been started. Emerging new auditing standards are being applied as this is being written. The hole that the accounting profession dug for itself will not get filled overnight. At least the profession appears to have stopped the digging and is beginning to tackle the hard issues it faces on the road back to relevancy and creditability. The mechanisms to put the train back on the track are there as the PCAOB takes the lead in setting new audit standards and the FASB begins to build principles-based accounting and financial reporting models. Change is tough, and people and professions resist making the necessary transition. Some of the makeover needs to occur with management teams, boards of directors, analysts, and the investing public.

I have a saying that "perception is nine-tenths of the law." As long as there is the perception that financial statements are exact representations of reality and precision, not much progress will occur. Financial statements are estimates based on the best accounting and business judgment available and nothing more than that. The American Assembly used the word "exactitude" based on an article that appeared in the April 2003 issue of The Economist, which indicated that too many members of the investing public felt that financial statements portrayed with precision the assets, liabilities, and financial performance of issuers. The profession and the PCAOB face a huge...