4. 4. (a) Congress should consider methods of increasing competition among accounting firms for selection as-independent auditors for major corporations. 2 (b) Long association between a corporation and an accounting firm may lead to such close identification of the accounting firm with the interests of its client's management that truly independent action by the accounting firm becomes difficult. 5. The Federal Government should directly establish financial accounting standards for publicly-owned corporations. 6. 7. The Federal Government should establish auditing standards used by independent auditors to certify the accuracy of corporate financial statements and supporting records. The Federal Government should itself periodically inspect the work of Indif 4 5 Dis- Strongly Agree 8. The Federal Government should restore public confidence in the actual 9. 10. 11. 12. 3 1 2 3 4 Indif- Disferent 5 agree The Government should require the nation's 15 largest accounting firms The Government should define the responsibilities of independent auditors so that they clearly meet the expectations of Congress, the public, and courts of law. The Government should establish financial accounting standards, cost accounting standards, auditing standards, and other accounting practices in meetings open to the public. (a) The Government should act to relieve excessive concentration in the supply of auditing and accounting services to major publicly-owned corporations. 12. (b) The Department of Justice and the Federal Trade Commission should investigate and determine whether violations of the Federal antitrust laws have resulted from excessive concentration in the supply of such services among all industries or within specific industries. 13. 1 2 Strongly IndifAgree ferent 51.67% 15.00% 44.14 13.51 45.36 13.40 47.26 14.02 4 (a) The Federal Government should retain accounting firms which act 13. (b) The Federal Government should not contract with such firms for the performance of management advisory services or other consulting services 2 3 which are incompatible with the responsibilities 1 Strongly Agree Disagree 14. The Securities and Exchange Commission should treat all independent auditors equally in disciplinary and enforcement proceedings under Federal securities laws. The membership of the Cost Accounting Standards Board should not be wat nated by representatives of industry and accounting firms which may some vested interests in the standards established by the board. 5 16. Federal employees should not serve on committees of the American Institute of Certified Public Accountants or similar organizations that are assigned to directly or indirectly influence accounting policies and procedures of the Federal Government. GRADUATE SCHOOL OF BUSINESS AND PUBLIC ADMINISTRATION Cornell University H. Justin Davidson, Dean David A. Thomas, Associate Dean June 9, 1977 Senator Lee Metcalf, Chairman Committee on Government Operations Washington, D. C. Dear Senator Metcalf: I've not asked to appear at the hearings currently being held about the accounting profession. I do submit herewith an article on "Published Financial Statements for CPAS", which your staff and Subcommittee may wish to consider. The article originally appeared in the July, 1972, issue of The Journal of Accountancy, and was followed soon thereafter by Arthur Andersen & Co. disclosing financial information about its operations. In my opinion, the arguments for the larger accounting firms following a similar course of action are as cogent today as they were in 1972. Although currently Dean of the Graduate School of Business and Public Administration at Cornell, I spent 13 years as a member and a partner of Touche Ross & Co. During that time, I had been both a member and chairman of the American Institute of Certified Public Accountants' Planning Committee. If your staff has any questions, I'll be glad to respond. |