Show me the Cows?!?




At Kern and Company, P.C. we make every effort to be certain that we do not get “lost in the numbers”. By “lost in the numbers” I mean that one can get so intense and engrossed in financial analysis that they miss the obvious irregularities and problems. Another term to describe this potential problem is a phrase often used by my father, “Don’t miss the forest for the trees!”

A few decades ago I worked on the audit staff in the Philadelphia office of an international accounting/auditing firm and, after a few years, switched to the firm’s management consulting staff. As part of my work as a consultant, I had designed a new accounting and management reporting system for a dairy. The dairy was located wholly within the city limits. In fact, it was located next to a milk processing company, from which our client purchased the milk, packaged in our client’s milk cartons.

The client was sufficiently pleased with our consulting services that they decided to discharge their prior auditors and engage the firm that I worked for. I was assigned to supervise and review the audit. Two members of the firm’s audit staff were assigned to assist me on the audit. I gave them a tour of our client’s dairy, including allowing them to observe our client’s milk cartons being filled and loaded onto our client’s trucks at the neighboring milk processing company’s plant.

After our two audit staff had been working on the audit for a week or so, I went to the work site to review their work to that point. Typically, some revenue and expenses are audited in great detail, looking at invoices, receiving reports, cancelled checks, etc. Other expenses that are less material in amount are typically not audited in such detail, but rather are analyzed to see if they varied in proportion to production and/or sales. Assuming no problems are encountered, the auditor will prepare a memo stating such. Normally the memo would end with a phrase like, “All expenses so analyzed appear reasonable.” I found such a memo in the work papers. One of the expenses so analyzed and deemed to appear reasonable was CATTLE FEED. And this in regard to a dairy that has no cattle!

I calmly got up from my chair, took and held a hand of each of our auditors, walked them to the window, looking out onto a major highway, and I said to them, “Gentlemen, what do you see?” Hearing no response and noting the glazed look in their eyes, I stated:

“Gentlemen, allow me to tell you what I see. I see US Route 1, six lanes north and six lanes south. I also see the plant next door, where our client gets the milk that our client sells. You know, gentlemen, the plant of which I gave you a tour. But you know what I don’t see gentlemen? I don’t see the cows who you think ate the feed! I don’t see any cows! I don’t see any cows because, as I told you, there are no cows. So to you I say, SHOW ME THE COWS! YOU KNOW, THE COWS WHO ATE THE FEED, WHICH YOU CLAIMED APPEARS REASONABLE.

At Kern and Company, P.C. we do our best not to get lost in the numbers. We believe in the charge “SHOW ME THE COWS!”