Can accounting errors ruin your life? JohnOliver explains how they can.

In this episode Last Week Tonight, John Oliver explores the world of debt buying:



The segment received wide publicity as he tried to out do Oprah by conducting the biggest giveaway on television - he bought $15 million worth of medical debt and forgave it. This article on Fortune does a good job of summarizing the show:

• US households owe $12 trillion in debt of which $436 billion is 90+ days past due. 
• Companies who discharge the debt sell it for pennies on the dollar to a growing number of companies that specializes in debt buying.  
• One company, Encore Capital, notes that in 1 in 5 Americans owes or has owed them money. 
• Debt that's been paid "come back to life", which is affectionately known as Zombie debt.

There was some controversy, however, about who he worked with to write-off the debt (they noted their grievances here, to which John responded here) and the value of the debt. On the latter count, is it really fair to criticize an act of charity that improved the lives of approximately 9,000 people?  

Nothing good happens in Excel. 
But the segment which is most relevant to us is when he starts talking about how the information is actually sold.  It is sold on spreadsheets. Oliver gets quite dramatic as he shares his his phobia of Excel and notes how "nothing good happens in Excel". He also explains that the spreadsheets are sold "as is"; meaning that the seller does not guaranty accuracy of the information related to the debt contracts being sold.

And that's where the jokes stops.

In the segment, he has footage from interviews with Jake Halpern, who wrote "Bad Paper: Chasing Debt from Wall Street to the Underworld". The book follows the life of a debt buyer of Aaron Siegel, who is born to a rich family in Buffalo, New York. He takes an array of characters, including his Brandon, who is an ex-con who does that gritty part of work of finding the debt, ensuring its good and collecting on it.

What caught my attention as I was going through book, is that it gave a bit more detail to what John Oliver mentioned about the banks selling the paper "as is". Halpern notes on page 58 of his book (see below for the link to the book), that when Washington Mutual sold Joanna and Theresa's debt to Aaron, the credits awarded against their accounts that were not reflected in the spreadsheet that was given to the debt buyer.


And that's how accounting errors can ruin lives.

When you read the life stories of these two ladies it's heart wrenching to think that a few lines on an Excel spreadsheet could have a detrimental impact on their lives. Some would cynically say this is over dramatic and try to find reason to blame Joanna and Theresa falling into this problem. But I don't think that's fair. When you read the lives of these people, it's clear that they were affected by factors beyond their control. It's really this broken system of debt collection that is responsible for them failing to get the debt relief that they were owed.

The way accounting systems and spreadsheets are designed and operated can have real impact on real people. As an accountant myself, I often wondered what value is accounting in the grand scheme of things. But as Halpern's story illustrates the accountants, bookkeepers, etc. had a real impact on the livesof these two women.

No one is saying that accountants have the same impact on the lives of people the way a cancer specialist does. But at the same time a few a lines on Excel spreadsheet could be the difference between perpetual anxiety and a good nights sleep.

Oracle & Google IP Trial: the Judge is the Gem

Last week the "WorldSeries of intellectual property trials" came to a close. Oracle, who purchased Sun Microsystems, was suing Google over its use over Java. Oracle claimed the Google had infringed on 37 of its copyright "APIs" or application programming interfaces. 

What is an API, you may ask? I also had the same question and found the following resources that may be of help:

• Simplest definition that I found was on the Guardian's reporting of the trial who defined APIs as "computer language that connects programs and operating systems – known as application programming interfaces". But I wasn't satisfied with that, so I dug some more.
• CNET had a number of good resources on the topic. This FAQ gives a good broad overview of Java and explains the relevance of APIs to the programming language. However, the article that probably sheds the most light on the topic is this one. The article walks through a key part of the trial where Joshua Bloch (former Sun Java-expert-engineer now working for Google) defines an API "as "names or words and a set of rules." When the program speaks to a library, it has speak in a very precise language, he continued. Typically the words are verbs and phrases, such as "remove the header."". What is also helpful is the accompanying slideshow that illustrates the lines of codes that Oracle claimed that Google infringed upon.

Google sought to pay Oracle 2.8 million, but Oracle wanted a cool billion for what it deemed to be a violation of the copyrights. The end result was that Oracle lost; the judge delivered a narrow ruling that Google use of the APIs was not a violation of copyright because APIs cannot be copyrighted. As reported on GigaOm, "The crux of Alsup’s ruling today is that 37 of the Java application programming interfaces aren’t eligible for copyright in the first place. Copyright typically protects authors’ work — in the form of books, music, computer code, etc — but doesn’t extend to functions or ideas."

IP: A drain on innovation

The case is a good piece of evidence for those that are critical over the patenting of software.Critics, such as John C. Dovorak, point out that the system is dysfunctional altogether. From a resource allocation point of view, this trial illustrates that a significant amount of resources are dedicated to litigation. According to Patrick Doody, an-ex partner at Pillsbury law firm, the trial is estimated to cost $50 million. Leo Laporte, owner of the This-week-in-Tech (TWIT network), routinely points out in the podcasts that he produces - that software giants waste money on patent suits instead of spending those same funds on innovation. To quantify his argument: if the average salary paid to an IT professional is $80,000,Google and Oracle could have invested in about 625 full-time equivalents (FTEs)  worth of work instead of litigating this trial. Of course such logic is lost on Capitalist enterprise, whose focus is profits over innovation. 

Technology & Society: A Watershed Moment

Another nugget that came out of this trial was the reason that judge William Alsup's (the judge presiding over the trial) rejected Oracle's argument. The judge challenged Oracle's assumption that a "range check" was difficult to build - because he knew how to code in Java! 

According to Wired,  "he had learned to code in Java for the trial — implying that he knew other languages as well — and he said that he had written some of the infringing code at least a hundred times since Oracle filed its suit in August 2010. “I can do it. You can do it. It’s so simple,” he said, adding that it takes less than five minutes. Then looked directly at Boies. “You’re one of the best lawyers in America — how can you make that argument?” he demanded." 

Posts in the tech community, notably on I-Programmer and O'Reilly, point out that this is  a watershed moment in society: code and technology is "a part of the world we live in".

Can one make the analogy that if judges should be this technology proficient, so should audit practitioners?  

Given the nature of the accounting profession, it would be difficult to make it mandatory for audit practitioners to program. However, on the other hand, the profession should use this opportunity to re-examine what aspects of technology should be a part of the audit practitioners skill set - given that is clear that society's attitude towards technology has clearly changed.