| Accountancy
Comes of Age
One
lesson to be drawn from the Sarbanes-Oxley Act is the positive
testimonial it has provided for the development of accountancy:
Financial statement audits and internal control attestations
have become an important part of public expectations. In
other words, accountancy has developed sufficiently to become
part of the national business fabric, subject to regulation
like other important national institutions.
The
Sarbanes-Oxley Act embodies one of the NYSSCPA’s two
primary goals at the turn of the 20th century. In 1902 and
1903, the Society was a prime mover in an attempt to create
federal recognition of CPAs and a national federation of
state CPA societies whose primary purpose was common state
CPA licensure laws based on the education model of New York.
The Society’s president, Charles W. Haskins, was also
president of this federation. Unfortunately, Haskins’
untimely death in January 1903 cost the NYSSCPA and the
federation its visionary leader. The Society withdrew from
the federation in 1904. Instead, the Society’s negotiations
with the New York City–based American Association
of Public Accountants (renamed the AICPA in 1956) and the
officers of the federation led to the AAPA becoming
the national accountancy membership organization.
The
AICPA’s greatest achievements arose from the nurturing
of accounting principles and auditing standards between
World War II and the present. Although FASB took over accounting
principles–setting in 1972 and the responsibility
for auditing and related professional standards now resides
at the Public Company Accounting Oversight Board (PCAOB),
neither accounting principles nor auditing standards would
be as developed as they are today if not for the AICPA.
Public
Interest
The
importance of accounting principles to the public at large
became too great for them to remain solely under the control
of CPAs. Accounting principles’ purposes relate to
the restricted information that organizations agree to move
into the public domain for either credit and capital purposes
or for stewardship and governance purposes. It should be
expected that the ultimate beneficiaries—financial
statement users—have an important say in the content
of accounting principles.
It
took longer for financial statement users and the public
to assert their interests in auditing standards, but they
now have done so because of concerns about the credibility
of financial information disseminated into the marketplace.
The credibility of financial statements depends not only
on the quality of accounting principles but also on the
integrity of the management that implements them and on
the competence and independence of the auditors that opine
on management’s representations.
Public
Goods
Because
accounting principles and auditing standards are so fundamental
to the infrastructure of the public’s concern about
valuation and accountability, it has long made sense for
both accounting principles and auditing standards to be
public goods, free for anyone to obtain, study, support,
and criticize. In 2002 FASB took a giant step by making
available on its public website (www.fasb.org) the original
text of those parts of accounting principles that it had
promulgated. For the first time, members of the public could
easily see what people meant by “accounting for leases”
or “accounting for stock options.” Their availability
cannot help but increase the public’s confidence in
them.
In
addition, the AICPA has now made available on its website
(www.aicpa.org)
the original pronouncements of Statements on Auditing Standards
(SAS). Like accounting principles, auditing standards are
too important to the public welfare to remain private, available
only to professionals. All standards of a profession deserve
treatment as public goods.
What
Versus How
Professions
should expect the public to want an important voice in determining
their goals and standards. How many of us would balk if
our doctors informed us that they were no longer going to
try to save or prolong our lives because sometimes their
procedures fail? How many of us would cry “foul”
if our attorneys informed us they could no longer be our
advocate because 50% of them lose in cases that go to court?
The public insists that doctors must strive to save lives
and attorneys must be conscientious advocates.
Individuals
steeped in the knowledge and practice of a profession, on
the other hand, have a comparative advantage in understanding
how those goals and standards should be achieved. Patients
do not determine or perform surgical procedures, nor do
clients coach attorneys on legal strategy and courtroom
tactics. One of the great failures in accountancy has been
the inability to separate the determination of desired outcomes
(standards) from the processes and procedures necessary
to achieve them. As we move into a period of greater regulatory
oversight, the great benefit to the public good that can
derive from the voluntary institutions of accountancy is
the unselfish development and dissemination of procedures,
techniques, strategies, and tactics to implement the spirit
of standards for outcomes set by regulators.
Robert
H. Colson, PhD, CPA
Editor-in-Chief
rhcolson@nysscpa.org
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