History of Accounting and Accounting Standards by otj20502

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									                         History - 1



Is Accounting a Profession?
                            History - 2



Examples of “Professions”
                                History - 3



Characteristics of a “Profession”
                          History - 4

What is a “Profession”?
                       History - 5


CHARACTERISTICS OF A
    PROFESSION
                                             History - 6


        U.S. Accounting History
                  Prior to 1930

 American Assoc. of Public Accountants (1887)
  – becomes AICPA

 No regular audits

 1913 – 16th Amendment (Income tax)
  – Demand for complete accounting records
  – Acceptance of depreciation

 Early consulting = management accounting
  and information systems
                                         History - 7


         U.S. Accounting History
                 1930’s
 Great depression

 Formation of the SEC
  – Regular audits
  – Standardized audit report

 Committee on Accounting Procedure (AICPA)
  – Establishes accounting standards
  – Cooperation with the SEC
                                                History - 8

          U.S. Accounting History
               1940 to 1970
 Establishment of GAAS (1947)

 Uniform CPA Exam

 CPAs become public figures

 Development of computer information and MAS

 Formation of APB (1959)
   – Standard setting body
   – Addition of permanent research staff
   – Dominated by CPAs

 Influence of partners of major CPA firms
   – Speak out on accounting standards
   – Possess “tenure” and support from firms
                                               History - 9
           U.S. Accounting History
                1940 to 1970
                  Continued
 SEC overrules APB on Investment credit
  (1963)

 Accounting scandals and lawsuits
  – Webtec, Nat’l Student Marketing, etc.
  – Firms begin to adopt “defensive posture”

 Continued criticism of APB
  – “Brush-fire” approach
  – Highly technical opinions
  – Debate over pooling vs. purchase
     • APB 16 & 17
                                                             History - 10
              U.S. Accounting History
                   1970 to 1980
 Further accounting scandals (Stirling Homex,
         Equity Funding, etc.)
   – Moss and Metcalf Congressional Committees
   – Issues of auditor responsibilities
   – Firms begin to help clients prepare responses to FASB
     proposals

 Formation of Wheat Committee

 Establishment of FASB (1973)
   – Independent body to establish accounting standards
       • Full-time, highly compensated, no CPA requirement
   – FAF retains influence (later reduced)
   – Formal recognition by SEC

 SEC proactive on financial reporting issues
   – Chief Accountant – “Sandy Burton”
   – Agency assumes lead on issues of accounting
     measurement and disclosures (“inflation reporting”)
                                                   History - 11
            U.S. Accounting History
                 1970 to 1980
 AICPA reforms (1977-1978)
  – SEC Practice Section
     • Peer reviews
  – Private Companies Practice Section
  – Public Oversight Board

 Dept. of Justice and FTC regulations (1979)
  – AICPA must eliminate rules against direct, uninvited
    solicitation, and advertising
  – Allow receipt of commissions from nonaudit clients

 Beginnings of criticism of MAS work for audit
  clients
                                                         History - 12
            U.S. Accounting History
                 1980 to Today
 “Professional” accounting firms become
  business firms
  – Emphasis on growth and broad “scope of services”
  – Acquisition and retention of audit clients is key (price
    competition is keen)
     • Withdrawal of accounting firms from dialogue on
       accounting principles
     • Perception that audit partners are less willing to
       “challenge” a client’s aggressive accounting practices
  – “Low-performing” partners are removed
  – No longer identify themselves as public accountants
    or auditors
  – Revenues from non-audit services grow to over 50%
    by 1999
                                                   History - 13

            U.S. Accounting History
                 1980 to Today
 Internationalization and merger of major
  accounting firms

 Significant litigation against accounting firms

 Crisis in S&L and banking industry
   – Congressional committee hearings – John D. Dingell


 Other business/auditing failures
    (ESM Securities, Wedtech, ZZZZ Best)
                                             History - 14

         U.S. Accounting History
               1980 to 2000
 Assaults on independence of FASB

 Aggressive accounting practices
  – Pressure for continued rapid growth in
    earnings
  – Significance of “hitting” analysts forecasts
  – Dot Com market of 1990’s
  – “Opinion shopping” by CEOs & CFO’s

 Significant concerns about auditors’
  independence because of “scope of
  services”
                                              History - 15


         U.S. Accounting History
              2000 to Today
 Major stock market decline

 Significant number of business frauds and
  related accounting issues
  – Enron, WorldCom, Global Crossing, etc.
  – Elimination of Arthur Andersen
  – MaDoff

 Sarbanes-Oxley

 IFRS

								
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