Professor Douglas Carmichael's reputation evidently preceded him to Washington, D.C. When Carmichael was named chief auditor at the Public Company Accounting Oversight Board (PCAOB), a journalist at a national finance magazine called him a "crusading terror." Another dubbed him "the new sheriff in town." And at least one accounting insider likened Carmichael to Darth Vader. So be it: Carmichael is not displeased. He doesn't mind striking a little terror into the heart of his profession. In his view, auditors have been complacent and auditing standards have been too lax for too long.

Carmichael's mandate at the PCAOB is to bring auditing standards into compliance with the Sarbanes-Oxley law, the primary piece of legislation to emerge from the accounting scandals associated with Enron, WorldCom, and other celebrated corporate debacles. To assume the responsibilities of his new job, he has taken a leave of absence from Baruch College, where he has been Wollman Distinguished Professor of Accountancy since 1983 and, more recently, the director of the Center for Financial Integrity. "It's a little strange being away from the academic life," Carmichael concedes.

His new duties have meant other significant changes in his life. He now spends at least three days a week in Washington, D.C., where he and his wife have found a pied-à-terre near the city's Chinatown district. Days spent in Washington are "one meeting after another," he says. It's not a complaint. Carmichael is meeting with Washington heavyweights and hiring a staff to help him overhaul auditing standards. Happily, on weekends he can return to home base—the 38-acre farm in Bucks County, Pennsylvania, where he and his wife, Carol, have lived since 1996.

In his new role as government official, Carmichael will no longer be able to comment publicly on the various accounting scandals that erupt on the financial pages of newspapers. CNN and CNBC have lost an informed and articulate analyst; for a while at least, Carmichael's media appearances will end. His role as an expert witness in private lawsuits involving accounting misdeeds will also be sharply curtailed.

For the time being, Carmichael is devoting himself to a higher calling.

"I think we're going to have a big impact on the quality and reliability of financial reporting," he says. As long as he is in charge, the holy grail in auditing standards will be the "public interest." He reports to William McDonagh, who heads the new accounting oversight board, and ultimately to the SEC. They will need to approve whatever new rules Carmichael's team crafts. He expects it will take a while to assemble a staff of individuals whose rectitude and commitment to the public good is as unswerving as his own. From now on, says Carmichael, "auditors will be only one of the constituencies we deal with . . . bank regulators and investment relations people will all have a voice. Our primary loyalty will always be to investors and the public interest."

Take the sensitive issue of fraud detection. Many auditors insist they can't be held responsible for detecting deliberate malfeasance on the part of CFOs and corporate comptrollers. Carmichael disagrees. "They use weasel words like 'collusion' to give themselves an out," he says. "Well, they shouldn't assume that people can't be working together . . . you have to expect that it will happen." In other words, auditors need to be both more skeptical and more aggressive in ferreting out corporate crooks.

Steve Lilien, former chairman of the Department of Accountancy and Carmichael's successor as director of the Center for Financial Integrity, says of his colleague, "He's the ideal person for the job . . . his knowledge of standard-setting is unique."

Baruch President Ned Regan, who worked closely with Carmichael at the Center for Financial Integrity, is an admirer of his lucidity and analytic prowess. "He is invariably thoughtful, measured, and accurate. I don't care what your bias is, when you listen to Carmichael, you come away impressed," Regan said.

Will Doug Carmichael have any respite from the burdens of his new job? Well, sure. There's always the farm. The Carmichaels try to spend two or three days each week on their homestead amidst the calming greenery and the animals. There are lots of animals, mostly notably chickens and guinea hens. Frank Perdue's birds may all look alike, but to the Carmichaels, chickens are what orchids were to Nero Wolfe: a serious hobby that demands knowledge and dedication. They care for a variety of rare and exotic species, ranging in color from grayish blue to bright red. The chicken collection includes "silkies," birds first seen by Marco Polo, who thought they were dressed in fur, and the "phoenix," which sports a 3-foot tail. Like chickens everywhere, they lay eggs, but these eggs come in unexpected hues of blue and green. The menagerie chez Carmichael also includes two oxen and a cow, a parrot, a dove, and a dog. But mostly it's the poultry that amuses and delights its caretakers. With the added pleasure of knowing their chicken-tending is helping keep the rarer breeds from virtual extinction.

The farm, which overlooks the Delaware River, is quiet and serene—everything Washington, D.C., is not. That's where Doug Carmichael can delve into the more cerebral aspects of his work. Down the line, that work will help protect investors from the careless and the unscrupulous. And who knows? It may even change the way American companies do business. —ZB

Photo, above:
Douglas Carmichael and bovine friend.