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 APROFESSION

History - 6

U.S. Accounting HistoryPrior 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

Great depression

Formation of the SEC– Regular audits– Standardized audit report

Committee on Accounting Procedure (AICPA)– Establishes accounting standards– Cooperation with the SEC

U.S. Accounting History1930’s

History - 8

U.S. Accounting History1940 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 - 9U.S. Accounting History

1940 to 1970Continued

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 History1970 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 - 11U.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 History1980 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 History1980 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 History1980 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 History2000 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