For Kimbrough, Stories Are Told in Ledgers

For Michael Kimbrough, accounting isn’t just about balance sheets. It’s about telling a company’s story.

“There is a sort of level of creativity you have to have in order to do well, because there are certain objectives you’re trying to meet in an audit,” he says. For example, coming up with evidence on a financial statement line item that the client might not have on hand, and then actually writing the story in the form of a memo explaining the analysis and conclusion.

This is what Kimbrough was doing when he was brought into Price Waterhouse after graduating from Washington University in St. Louis in the early 1990s. At the time, PW was looking for liberal arts students, and Kimbrough, who had a major in economics, was just the right fit. The idea to hire liberal arts majors who could be trained to be entry-level accountants, Kimbrough surmises, was that they could be paid less than accounting majors – and that they would only stay a couple years before heading elsewhere.

“But I realized, I can do what they’re doing. I’m as smart as they are,” he recalls. Not only that, he had already taken several accounting courses to fulfill his economics major, and was only two courses away from qualifying to take the CPA exam. “It came as a bit of a surprise to the firm when I passed the exam.” From there, he was put on the same career track as the other accountants.

Kimbrough thoroughly enjoyed working with clients, developing relationships with them, learning about their businesses and how they were run, and telling their stories through their numbers. But most of all, he liked mentoring junior staff, because he appreciated when people had helped him before. “I liked seeing them understand – and those lightbulb moments when they got what they were doing.”

It wasn’t until a friend from what later became PriceWaterhouseCoopers went to pursue her PhD that the idea of a doctorate in accounting crossed Kimbrough’s mind, he says. “It gave me the impetus to explore it more and how researching accounting is different from the practice of accounting.”

He completed his PhD at Indiana University in Bloomington and went to Harvard Business School to teach. The Enron scandal and subsequent downfall of accounting firm Arthur Andersen had just occurred, and the Sarbanes-Oxley Act had recently passed. It was pervasive throughout the accounting curriculum, he recalls, and a major lesson to his students – taking personal responsibility for financial statements. “You need to be on top of the accounting. That’s what makes you on top of your business,” he says. “It’s going to help you make better business decisions.”

Today, the storytelling has broadened to include less clear-cut areas, such as figuring out the boundaries in which firms should provide voluntary disclosures. “It’s interesting how managers weigh those tradeoffs,” he says. “The fact that we need voluntary disclosure highlights what accounting, under current standards, may be missing.” An example he likes to cite is the value of Apple’s innovative workforce, and an exercise he uses in class to show subjectivity in accounting.

Kimbrough says he doesn’t just teach, but provides his students with a framework. “The goal of accounting is to reflect the economic reality of an enterprise,” he says. “I want them to understand the subjectivity in that, and that accounting is like a scientific system and has similar properties and logic to natural systems.”

–By Rin-rin Yu, Maryland Smith special writer