I apologize for being so slow in responding to Sen. Metcalf's letter of February 23, 1977, but the long hours of "tax season" delayed me. I have been following the debate over the accounting profession as it has developed these past weeks.

One way Big 8 firms dominate the local firms has been overlooked by your staff. For some years, I have been told that one way a new CPA can obtain clients is to become a "correspondent" for a Big 8 firm. (As you know we are forbidden to advertise or to"mnoroach" upon the practice of another CPA). The way being a correspondent would work is shown by the following example: Assume a Big 8 firm has a client with an inventory in a small western Nebraska tom, many miles from a Big 8 office. The inventory is material in size, let's assume, so it needs to be observed at the balance sheet date. In theory, a CPA living in that small town could be a correspondent for the Big 8 firm, and observe the taking of the inventory. In fact, I know of no instance anywhere at any time where this has been done. The Big 8 firm will send their staff anywhere in the country, rather than use a local practitioner. Of course the client, and ultimately the consumer, pays for this added travel cost. I remind you that the local CPA has passed the same examination that the Big 8 staff has passed; that is, if the Big 8 is sending staff that has passed the exam. Further, the local CPA is more likely to have an understanding of local conditions. Continuing with the example, if the inventory was grain, I wonder if the big-city CPA can tell wheat, rye and oats apart.

Mr. Jack Chesson

page 2

April 22, 1977

What changes, if any, are needed is more obscure. Perhaps there should be a limit on the number of staff a CPA firm may have. Or perhaps a limit on khe number of S.E.C. olients a firm might have. I favor professional schools of accounting as there are in other professions; perhaps more education for CPAs is the answer. Anditors could be forced to rotate as they do elsewhere in the world.

I realise these are novel, but as the debate has developed, I seem to find a belief that only a large CPA firm can andit a large public company (see p. 36 of The Institute Responds........). I just can't believe that yet, provided that local CPAs overcame their jealousy and cooperated as correspondents.

If you seek unbiased data on CPAs and the sociology of the profession, I refer you to my dissertation "The Attitudes of Certified Public Accountants Towards Social Accounting: A Survey of National and Nebraska Opinion." It was presented at the University of Hebraska, December, 1976, and should be available in the Library of Congress on microfiche.

Thank you for the opportunity to present my views. One final personal note: I personally as reluctant to believe that the answer to Big Business is Big Government. Rather than strengthen the S.E.C.'s already vast powers, seek ways to strengthen the CPA so that state and national organisations can resist client pressures more effectively.

Sincerely yours,

Fredens Mr. Stuier, J.

Frederic M. Stiner, Jr. Ph.D.

I note from the papers that you are beginning hearings concerning
the accounting profession. I agree with the statement in the Wall Street
Journal which stated that the smaller firms are generally ignored by the
American Institute in setting up generally accepted accounting principles
for their clients. The smaller accounting firms generally handle account-
ing and many other related problems of small business, and certainly should
not be governed by the rules applied to large firms. The rules that apply
to these are too cumbersome and costly for the small businessman.

The American Institute has done very little to aid the local practi-
tioner in setting up standards. The one positive thing that was done
which took about two years, was the publication of a report entitled "Gen-
erally Accepted Accounting Principles for Smaller and/or Closely Held
Businesses" which was issued in August, 1976. This was a very good report
but I suppose it will take another three or four years before the American
Institute takes any actions to amplify or codify the suggestions.

I think your committee would accomplish much for small business and the local practitioner if it would inquire into the Institute's activity in setting up standards for small business.

THE

GROSS CPA COURSE INC
PHILADELPHIA, PA. 19102 • PE 5-6120
May 12, 1977

1420 WALNUT STREET •

Senator Lee Metcalf

Senate Office Building

Washington, D.C.

Dear Senator:

Your report startled very few of the small accounting practioners. The F.A.S.B. cannot be independent so long as its members can return to their former positions when their terms expire. Eisenhower warned of the military-industrial complex. In much the same way the F.A.S.B. members are influenced by their former

associates.

A really independent board is imperative. No member should be patted to return to public accounting or any profit-making This does not deprive him of economic opportunities: OLINER, FRfessional organizations, governmental units -- would Never to have such persons.

Please be advised that there are numerous CPAs, particularly those who are members of local or small regional firms, who strongly disagree with the Institute's response to the Metcalf report. First of all the railroading process used to create the response is indicative of the control over the Institute, or in other words the subtle domination or control by the larger firms. Secondly I do not see the justification for the biased positions presented as being the perogative for the Institute to adopt (theoretically speaking for its membership), without first soliciting views of its members. As a matter of fact, the process used for the AICPA response in this matter is prima facie evidence of certain of the deficiencies noted in the Metcalf report.

While many of us agree as to the futility of governmental bodies establishing accounting principles, there are many who see numerous problems in the organizations or processes as currently established. As a member of an Institute committee, it is easy for me to note almost total domination of all AICPA activities by the larger firms. In addition, historical performance will reflect many AICPA or FASB positions adopted because of pressures exerted by the Securities and Exchange Commission. This is utterly ridiculous, in that our profession can allow the SEC to establish principles whose impact carry far beyond reporting procedures properly required by that agency.

It is equally as obvious that the present policies of the AICPA (as controlled by the larger firms) and the other superficially created cover organizations such as the FAF and the FASB, are intended to eliminate the smaller practitioners from any area of accounting desired by the larger firms as their baliwick. However you should be aware that the local practitioners will no longer accept this kind of treatment, and the Metcalf