FEATURES • Summer 2002

In his more than 40 years as a professor of accounting (first at the University of Chicago, then at Washington University), Nicholas Dopuch has produced pioneering research in the areas of financial reporting, auditing, and regulation of accounting. His contributions were recognized in 2001 by his induction into the Accounting Hall of Fame.

By Brenda Murphy-Niederkorn

With the crushing collapse of Enron Corporation in late 2001, and the subsequent highly publicized U.S. congressional investigation into the bankrupt company's suspect financial management and accounting practices, there could hardly be an individual today—no matter the level of his or her business savvy—who will not think twice before wholeheartedly trusting the information contained in a company's annual report.

Enron, the Houston-based energy-trading company, has been accused of hiding more than $1 billion in debt through a complex setup of special purpose companies in which Enron used its own stock to hedge its risk. Enron's longtime auditing firm, Arthur Andersen LLP, approved the company's financial statements. Both companies are under investigation by Congress, as well as the U.S. Justice Department and the Securities and Exchange Commission (SEC). And company employees, shareholders, and investors are filing civil lawsuits.

Nicholas Dopuch, the Hubert C. and Dorothy R. Moog Professor of Accounting and director of the Ph.D. program at the Olin School of Business, was not surprised that Enron's demise happened when it did. The U.S. economy plunged during the fourth quarter of 2001. Dubious accounting procedures, he says, hold up only as long as the economy does.

"Fortunately, most firms don't have similar errors," says Dopuch. "We hear about these scandals when the economy turns downward."

Dopuch isn't just a longtime market watcher but a world-renowned pioneer in accounting research—areas include financial reporting, auditing, and regulation of accounting. In these areas, he has written more than 30 papers and contributed to four accounting books and monographs. He also served as editor of the University of Chicago-published Journal of Accounting Research (JAR) from 1968 to 1985 and has been the journal's co-editor since 1986. Dopuch twice has been named winner of the American Institute of CPAs Award for Outstanding Contribution to Accounting Literature (1974 and 1982), and he has twice received the Outstanding Accounting Educator Award of the American Accounting Association (1981 and 1999). He earned the Dean's Medal from the Olin School of Business in 1995.

Early in his career, Dopuch was interested in financial accounting and managerial accounting. Financial accounting involves reviewing statements prepared about a firm's finances and operations that are based upon generally accepted accounting principles; managerial accounting involves looking at the design of a firm's financial information reporting systems. But since 1987, Dopuch has taken a keen interest in auditing and consulting practices—and it is this area that has been scrutinized in the wake of company scandals. Dopuch participated in a February 2002 panel discussion, "Conflict of Interest in Accounting and Consulting," at the Washington University law school's F. Hodge O'Neal Corporate and Securities Law Symposium. He discussed how new auditing regulations hastily conceived could have adverse effects on capital markets.

The SEC requires companies to report both quarterly and annually and requires an annual audit by an independent firm. With the increase in lucrative managerial advisory services offered by auditing firms—including accounting software and internal control design, acquisition valuation, and pension liability actuarial services—their independence as auditors has come into question. The issuance of a negative audit report could result in a significant revenue loss to an auditing firm not only from future audits but from these managerial services as well.

"There has to be more general restrictions on firms performing non-auditing services (for the same companies that they audit)," says Dopuch. "There have to be tighter rules on the actions of auditing firms."

Dopuch, a St. Louis native and graduate of the old McKinley High School, earned his undergraduate degree at Indiana State University and master's and doctoral degrees from the University of Illinois. He is a certified public accountant and a member of the American Institute of CPAs and the American Accounting Association.

Dopuch began his long association with Washington University in 1978 as a Distinguished Visiting Scholar at the Center for the Study of American Business (now the Weidenbaum Center on the Economy, Government, and Public Policy). At that time, he was a professor of accounting at the University of Chicago (1961-1983) and had served on its Ph.D. admissions committee for 15 years. He joined Olin in 1983 at the urging of former Dean Robert Virgil and with the support of then-Chancellor William Danforth. Not only would Dopuch be able to lead the Olin accounting department's direction in research, but he would be asked to revamp and reinvigorate the School's Ph.D. program.

"They are two outstanding individuals—Bob as a friend and Danforth as a boss," says Dopuch. "You don't come in to change a school unless the chancellor is behind you."

Dopuch, who lives with his wife, Barbara, in Ladue, Missouri, further explains his move to Olin in his written response to induction into the Accounting Hall of Fame in August 2001.

"With the kinds of experiences and relationships I had at Chicago, people have wondered why I ever left to accept a position at Washington University," he writes. "One was the persuasiveness of Bob Virgil. Another was simply that I thought it was time for new blood to be infused into the JAR, and I knew I would not enjoy looking over the shoulders of my successors. Besides, my move to Washington University gave me the opportunity to embark on new paths of research. ..."

One of those new research areas—creating competitive markets in controlled laboratory settings to study issues in auditing with Ronald R. King, professor of accounting—has helped to establish experimental economics as an important method of accounting research. Dopuch also has done field work in managerial accounting with Mahendra Gupta, associate professor of accounting.

"Nick is the grandfather of the academic accounting profession worldwide," says Gupta. "It's not just what he's done at Olin. His research and editorial contributions are recognized at every university that does accounting research."

Gupta credits Dopuch's research success to "his eye for relevancy, his push for excellence, and his curiosity that is almost like that of a 2-year-old." He says, "Nick is not afraid to look at new areas or ways to approach problems. That sets him apart. A lot of academics settle on one area where they can excel; Nick challenges everybody with whom he comes in contact, including his colleagues."

As a doctoral student at Olin, Mort Pincus, Ph.D. '82, now a professor of accounting at the University of Iowa in Iowa City, served as a teaching assistant for Dopuch, who later agreed to chair his dissertation committee. (Pincus was both an assistant and associate professor of accounting at Washington University before joining the University of Iowa in 1994.)

"I thought I'd be intimidated by Nick, but it was quite the opposite experience," says Pincus. "He'd ask probing questions and was a wonderful listener. You got the sense that he valued what you had to say. Here was a giant in the field actually listening to a doctoral student. ... In my work with doctoral students today, it occasionally crosses my mind: 'That's something Nick would do.' You don't do the work for students, but you also don't leave them unguided. Nick certainly didn't do the work for you; he made students become self-starters."

Dopuch will tell you that it's no easy task to earn a Ph.D. at Olin, and he seems proud of the 42 students who have done so during his tenure. Polaroid snapshots of each are displayed just outside his office.

"Nick has led the Ph.D. program since 1983," says Stuart Greenbaum, dean of the Olin School. "In just the last five years, the program has grown by 50 percent. We've placed our students at Harvard, MIT, and the London Business School, to mention but a few. Under Nick's leadership, we've expanded the representation of minorities and women in the program, a high priority for the School. This program has really flourished under Nick's leadership."

The accounting profession also will grow from the Enron scandal, according to Dopuch. He tells the story of a now-deceased brother-in-law who owned a small accounting firm in California. His clients were highway construction firm owners, whom he audited for the state. This accountant told Dopuch that he wouldn't vote for a limited liability law that would protect his personal assets from lawsuits. "Why would anyone hire me if I won't back my audits with my personal wealth?" was his response.

"I think all auditors should feel the same way," says Dopuch.

Brenda Murphy-Niederkorn is a free-lance writer based in St. Louis, Missouri.











































































As director, Professor Nicholas Dopuch has helped expand the representation of women and minorities in the business Ph.D. program. Dana Hollie (left) is a doctoral student in accounting.