Managerial Accounting For Dummies
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Believe it or not, managerial accountants have a number of legends to admire. A few people have made great contributions to the profession and to business as a whole through ingenuity, persistence, and a willingness to stand up for the principles that they believe in.

These creative individuals found new and better ways to solve old problems, were famous whistleblowers who reported financial wrongdoings, and congressmen who led the U.S. federal government’s move to regulate the accounting profession.

Dan Bricklin

Few people have changed the lives of all kinds of accountants more than Dan Bricklin, who had the idea for the first electronic spreadsheet program. While a student at Harvard Business School, he noticed that the new Apple II computer could be programmed to simplify many accounting and finance calculations. With Bob Frankston, Bricklin wrote the very first spreadsheet program, VisiCalc, for the Apple II computer.

Interestingly, even though VisiCalc led to the creation of Microsoft Excel, transforming both accounting and finance and vastly increasing the usability of personal computers, Bricklin and Frankston never patented their revolutionary idea for the electronic spreadsheet.

Cynthia Cooper

Cynthia Cooper, vice president of internal audit at WorldCom, noticed evidence that the chief financial officer, Scott Sullivan, was cooking the books. Members of her internal audit team secretly hacked the company’s records, took them home, and spent many late nights investigating. Eventually, they accumulated evidence of billions of dollars' worth of fraudulent net income and reported it to the board’s audit committee and external auditor.

In 2002, Cooper and Sherron Watkins represented Time Magazine’s Person of the Year, the Whistleblower.

Sergio Cicero Zapata

After being involved in a series of bribes to public officials in Mexico, Wal-Mart employee Sergio Cicero Zapata decided to come clean. He reported his activity to Wal-Mart’s general counsel, who then investigated the allegations in detail. The investigation indicated that Wal-Mart employees regularly bribed government officials in order to obtain permits to build new Wal-Mart locations, a violation of the Foreign Corrupt Practices Act.

When he was dissatisfied with the progress of Wal-Mart’s internal investigation, Zapata went to The New York Times and other public outlets.

Eliyahu Goldratt

Israeli physicist Eliyahu Goldratt noticed many parallels between physics and a manufacturing production line. He developed mathematical models to measure and describe logistics and the flow of goods through a factory. He later expanded his models to improve and optimize the performance of service companies.

No big fan of traditional managerial accounting, Dr. Goldratt wrote a novel, The Goal, to describe how to apply his theory of constraints models to a manufacturing process. It seems that managerial accounting is no big fan of Dr. Goldratt, either. Many claim that his theories are copied from others or that they have limited applicability.

Ernest Hauser

Ernest Hauser, a former lobbyist for defense contractor Lockheed, admitted to Senate investigators that Lockheed representatives had paid at least $10 million dollars to West German Minister of Defence Franz Josef Strauss and his party for that country’s purchase of 900 F-104G Starfighters in 1961. This confession led to the discovery of additional bribes made by Lockheed to foreign governments (and certainly didn’t improve the public image of defense contractors).

As a result of the Lockheed scandal and others, the federal government passed the Foreign Corrupt Practices Act of 1977, requiring companies to keep internal controls to ensure that bribes are not paid to foreign governments or officials.

Robert Kaplan

Harvard Business School Professor Robert S. Kaplan developed the balanced scorecard. Kaplan’s revolutionary contribution to the field of managerial accounting was the fundamental idea that managerial accountants need to look past net income and other profit-oriented figures, which describe past activities, and toward predictive and other nonfinancial measures that help managers to project what will happen in the future.

Kaplan’s fame — and vast consulting income — have inspired many of his fellow accounting professors.

Harry Markopoulos

Harry Markopolous was chief investment officer of Rampart Investment Management when he noticed that the results of another investment manager seemed very fishy. Somehow, this investment manager, Bernard Madoff, managed to steadily deliver monthly returns between 1 and 2 percent. When Markopolous investigated Madoff’s investment strategies, he concluded that they couldn’t possibly work — and that Madoff’s organization was probably a huge fraud.

Although Markopolous alerted the authorities several times, Madoff’s fraud wasn’t discovered until years later, when his investment funds started to run out of cash. Madoff’s scheme resulted in at least $65 billion in losses for his thousands of investors, even forcing the Wilpon family to sell a minority stake in the New York Mets.

Paul Sarbanes and Michael Oxley

U.S. Senator Paul Sarbanes and U.S. Representative Michael Oxley championed the Sarbanes-Oxley Act of 2002, also known as the Public Company Accounting Reform and Investor Protection Act. This law created the Public Company Accounting Oversight Board. It also requires companies to have effective systems of internal controls in place, making executives criminally responsible for issuing fraudulent financial reports to investors.

The Sarbanes-Oxley Act has forced many companies to improve their internal controls. It has also boosted the demand for — and salaries of — managerial accountants.

David Stockman

David Stockman was director of the office of management and budget under President Ronald Reagan from 1980 until 1985. Essentially, this position is the chief accountant responsible for planning and reporting the federal government’s own finances, and Stockman is probably its best-known occupant. He was known as an outspoken deficit-fighter who continually argued with both the White House and Congress to reduce federal budget spending.

He also derided the federal government’s budget bureaucracy, at one point admitting that “none of us really understands what’s going on with all these numbers.”

Sherron Watkins

In 2001, Sherron Watkins, Enron’s vice president of corporate development, noticed some internal reports that didn’t quite make sense to her. She investigated them thoroughly and brought them to the attention of senior managers. After the Enron fraud was revealed, she was a key expert in explaining the nature of Enron’s bizarre off-balance-sheet transactions.

Some people argue that Watkins wasn’t a real whistleblower because she chose to internally report the frauds she discovered rather than bring them to the attention of the authorities. Others maintain that she is a true whistleblower because she risked her job and career to try to stop a massive fraud. In 2002, Time Magazine named the Whistleblower its Person of the Year, singling out Watkins and Cynthia Cooper.

About This Article

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Mark P. Holtzman, PhD, CPA, is Chair of the Department of Accounting and Taxation at Seton Hall University. He has taught accounting at the college level for 17 years and runs the Accountinator website at, which gives practical accounting advice to entrepreneurs.

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