The Position of NAA as a Sponsor

of the Financial Accounting Foundation

Following the submission of this special NAA committee report to the Wheat Commission, and recommendations from other interested bodies, the Wheat Commission recommended the formation of the Financial Accounting Foundation and the Financial Accounting Standards Board, substantially as they are presently organized. Shortly thereafter, the NAA was invited to participate as a sponsoring organization of the FAF, not only because of our committee's belief that accounting

principles should be set in the private sector, but also to provide as broad a base as possible of individual support to the Foundation.

As a sponsoring organization, the NAA, on two occasions, has been asked for recommendations of individuals to serve on the Financial Accounting Foundation Board of Trustees. In each instance our National President then in office has submitted the names of several individuals, one of whom has been selected as a Trustee. To the best of my knowledge, there has been no further contact between the NAA and these two individuals regarding Financial Accounting Foundation policies and procedures. In addition, the

NAA has made no

recommendation

as to how these

individuals should carry out their responsibility to the FAF.

Mr. Chairman, I sincerely appreciate this opportunity to appear before you, and, again, I will be pleased to furnish any additional information you or the members of your Committee or staff may request.

*Two-digit Standard Industrial Classification Index as defined by the Office of Management and Budget See SRDS: Business Publication Rates and Data.

...

[Whereupon, at 11 a.m., the subcommittee recessed to reconvene at

ACCOUNTING AND AUDITING PRACTICES

AND PROCEDURES

TUESDAY, MAY 24, 1977

U.S. SENATE,

SUBCOMMITTEE ON REPORTS, ACCOUNTING, AND MANAGEMENT OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS, Washington, D.C. The subcommittee met at 9 a.m., pursuant to recess, in room 6302, Dirksen Senate Office Building, Hon. Lee Metcalf (chairman of the subcommittee) presiding.

Present: Senators Metcalf, Danforth, and Percy.

Also present: Vic Reinemer, staff director; E. Winslow Turner, chief counsel; John B. Chesson, counsel; Jeanne A. McNaughton, chief clerk; Anne Boni, legislative assistant; and Christopher Taylor, research assistant.

Senator METCALF. The subcommittee will be in order.

This is a continuation of hearings conducted by the Subcommittee on Reports, Accounting, and Management on accounting practices and procedures. We have the farm bill on the floor today. We have a vote scheduled at 10 o'clock. We may have other votes during the course of the morning. So we are going to have some interruptions. However, we hope to get through our entire witness list.

Our first witness this morning is Mr. Harvey Kapnick, managing partner of Arthur Andersen & Co. We are delighted to have you here this morning, Mr. Kapnick. Go ahead with your prepared statement. TESTIMONY OF HARVEY KAPNICK, MANAGING PARTNER,

ARTHUR ANDERSEN & CO.

Mr. KAPNICK. Thank you, Mr. Chairman. My name is Harvey Kapnick. I am chairman and chief executive of Arthur Andersen & Co., a worldwide organization of accountants and auditors. Your subcommittee has taken the lead in the Congress in reviewing and evaluating the accounting profession. We at Arthur Andersen & Co. are pleased to present our views and to join with you and the Congress in this important endeavor.

I am pleased to have the opportunity to submit our views on the accounting profession and how we can better fulfill our public responsibilities. We have prepared a booklet on our views including my statement before this subcommittee. Both my statement and the booklet have been unanimously approved by the 21 members of our firm's worldwide board of directors.