America's top accountancy watchdog has a theory about why so many Irish immigrants went into accountancy in the US. "Most of us had been in America a sufficiently short time not to have accumulated family wealth," says William McDonough, whose father came to America from Roscommon and his mother from Mayo around 1916, writes Conor O'Clery

"There were essentially four things that a young Irish-American could do. You could be a priest, depending on how you felt about celibacy - I rather preferred not - or you could go into one of the professions: law, accountancy or medicine."

Many chose accountancy, a highly respected profession - until recently. The accounting scandals of the past few years meant that "all accountants are now deemed to be rather devious", he says.

"It's a terrible blow to them as a profession. I say to them: 'you are thoroughly honest people, you probably think it's a very bum rap'. But enough people misbehaved that they brought a bad name on the whole profession."

Mr McDonough (69) has been mandated by the US government to restore the good name of accountants and faith in American accountancy as head of the Public Company Accounting Oversight Board (PCAOB), set up under the 2002 Sarbanes-Oxley Act after corporate and accounting scandals.

Damage control is a career speciality of Mr McDonough. This was his job title in the US Navy in the 1950s.

In 1998, as president of the New York Federal Bank, he helped save the financial world from collapse by organising a rescue of Long Term Capital Management, the giant hedge fund whose debts threatened financial stability. He also played a key role in keeping the US financial system afloat after September 11th.

Mr McDonough - who is visiting Brussels this week to discuss the thorny issue of regulating non-US accountancy firms that audit companies selling securities in the United States - spoke in his New York office about the urgent need to restore confidence in certified corporate accounting statements to ensure they present "a complete, true and timely report that can be relied on".

Policing the profession is inconsistent with the American belief that its system of market economy is the best in the world, he says. "Three or four years ago, everybody thought we were the model for how the world should behave."

But two things convinced people that the scandals amounted to more than "a few very bad apples in an otherwise very good barrel".

These were, first, the way some accountants helped companies cook the books and second, the ridiculously high level of executive compensation.

Despite growing public outrage, he points out that chief executive pay, has gone from 40 times to 500 times more than the average company employee since 1980. (In 2003, it increased by 6 per cent to an average of $11 million [€8.9 million\].)

"It is hard to find any economic theory or any sound morals that will tell you that it makes any sense," he says. "I think it was crazy, irrational and, in my own view, immoral."

Mr McDonough, whose job pays $556,000 a year, declines to comment on egregious examples such as Mr Dick Grasso, who received $139.5 million as head of the New York Stock Exchange, but he emphasises that major corporations must return to justifiable remuneration.

Changing the membership of compensation committees to make them more independent had so far not had an impact, he acknowledged, adding somewhat sceptically that "one might be charitable enough to say 'let's give them another year to see if they get it right the second time'."

If not, Congress might be forced by public anger to pass a law forcing change, which could be damaging for the economy.

What about companies that say if they don't pay big bucks they would not get people of high calibre?

"Well that's what they say," he replies. "The next question is whether it's true." He hopes that the top 10 US companies will set an example by doing a realistic analysis of how much the chief executive should be paid.

If it is reduced, the chief executive could say: "Nobody's going to ask me to pay back the amounts I got in recent years so good for me, I got away with it." On the other hand, the chief executive could say: "I'm outraged that they don't want to pay me what I'm used to being paid."

In Mr McDonough's view, that would show such terrible judgment that they would be better off with a new chief executive.

The compensation phenomenon arose from the "brilliant" way US companies coped with the globalisation challenge in the 1990s, investing in information technology not as an end in itself but as a way to run their businesses better, he believes.

Profits expanded and stock prices went up in the longest expansion in US history. "It looked like a miracle, like the business cycle was dead, and people said: 'Leadership in corporate America now must be a group of sheer geniuses and so you can't possible pay them enough'."

Also during the 1990s, companies, "in dealings with investment analysts, were reaching a consensus opinion about how much the next quarterly earnings should be. This became an invitation to cook the books, because if you - the chief executive - missed the earnings forecast you were thought to be a fool and there was usually a very severe reaction in the stock price because of the surprise."

The only way accounting firms can regain their reputation is to "both be virtuous and appear virtuous", especially in handling tax consulting work, Mr McDonough believes. The public would be dubious if accountancy firms continued to create doubtful tax shelters to save companies money.

"What I'm doing is mounting what Theodore Roosevelt called the bully pulpit, saying you shouldn't do it because not only would it be evil but it would show very bad judgment in restoring confidence."

Mr McDonough has been to Ireland several times since his first visit in 1972 and he credits very good policies and some very astute business leaders in Ireland for its success, especially in the financial services sector. The key to continued success in the global economy is flexibility.

"For the US and Ireland, we have to ensure that our education systems are so good that we are preparing the high value-added workers of the future. Really the only way to stay ahead of the game is always to be at the upper end of the sophistication of business so that you can pay your people very well."