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History - 1

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History - 6. Great depression. Formation of the SEC. Regular audits ... Enron, WorldCom, Global Crossing, etc. Elimination of Arthur Andersen. Sarbanes-Oxley ... – PowerPoint PPT presentation

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Title: History - 1


1
Is Accounting a Profession?
  • What difference does it make?

2
Examples of Professions
3
Definitions of a Profession
4
CHARACTERISTICS OF A PROFESSION
5
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

6
U.S. Accounting History 1930s
  • Great depression
  • Formation of the SEC
  • Regular audits
  • Standardized audit report
  • Committee on Accounting Procedure (AICPA)
  • Establishes accounting standards
  • Cooperation with the SEC

7
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

8
U.S. Accounting History 1940 to 1970 Continued
  • SEC overrules APB on Investment credit (1963)
  • Accounting scandals and lawsuits
  • Webtec, Natl 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

9
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)

10
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

11
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 clients 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

12
U.S. Accounting History 1980 to Today
  • Internationalization and merger of major
    accounting firms
  • Significant litigation against accounting firms
  • Crisis in SL and banking industry
  • Congressional committee hearings John D.
    Dingell
  • Other business/auditing failures
  • (ESM Securities, Wedtech, ZZZZ Best)

13
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 1990s
  • Opinion shopping by CEOs CFOs
  • Significant concerns about auditors independence
    because of scope of services

14
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
  • Sarbanes-Oxley
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