Honorable Senator Metcalf In recent years, the rules were amended so that the ruling body no longer has to present any issues to a vote by mail of the entire membership. Many policy decisions are developed in relative secrecy, then given token exposure to the membership, and then rammed through the Executive Council without adequate time for reaction at the grass roots level. Officials of the Institute have appeared at state conventions and made it quite clear that we have no choice but to go along with Council actions and that there is nothing we can do about it. As a result of this oppression, there are now several associations of local CPA firms who are attempting to combat this situation. We welcome your investigation into the "Accounting Establishment". The undersigned personally believes that there are overtones of anti-trust in this problem that could stand investigation from the Justice Department. One of the main complaints in this respect is that the overall reporting requirements necessary for big public companies are made mandatory by the Institute for reporting by all business with the result that unnecessary work is performed at great cost to small business. This is obviously not in the public interest. Please include this letter with your report to the Subcommittee. We do not agree with the recommendations of the Subcommittee that Congress should enact strong legislation to enable the federal government to cure problems of the accounting profession. We do want, however, to let the Subcommittee know that thousands of small Some of the problems we feel the AICPA has not addressed itself to are: small businesses are required to issue more and more complex financial statuments at an ever increasing accounting cost. These costs, usually for unaudited financial statements, must be passed on to the public. Larger clients of local accounting firms, usually small businesses in the public money market, are told by underwriters and other members of the financial community that their financial statements must be audited by a national accounting firm. Qualifications of the local practitioner are not considered. Very truly yours, Gems & Coming Harold J. Comins, C.P.A. HOS DE O MC KEEHAN, CPA. MCKEEHAN, HALLSTEIN & CO. 1730 WEST OLYMPIC BLVD., SUITE G14 LOS ANGELES, CALIFORNIA 90015 April 11, 1977 Mr. Robert A. Satin, CPA, Chairman Dear Mr. Satin: As a fellow member of the Local Practitioners Action Forum, I would like to express my thoughts relative to your appearance before Senator Metcalf's Committee on April 21, 1977. Of course, the basic reason for the Forum's existence is our belief that the small accounting practice unit, and its clients, are not adequately represented in the policymaking and governing bodies within the American Institute of Certified Public Accountants. The individual practitioner and members of small practice units comprise a numerical majority of the AICPA membership in public practice yet our representation is through an "advisory" group consisting of 15 members who are not necessarily individual practitioners or in small firms. In addition, with our vast number of practitioners, Southern California is without representation, the nearest Advisory Group A member being located in San Francisco. As the leading and most prestigious accounting organization in the World, the AICPA must respond to the needs of the practice of accountancy by small firms as well as the requirements of the large firms with their gigantic sophisticated audit clients. I realize that covering this entire spectrum is not Senator METCALF. Thank you very much, Mr. Satin. Now we will hear from Mr. Watson. The Senate is in session, but we have permission to sit at least for an additional hour, and we will finish the hearing today. Go ahead, Mr. Watson. TESTIMONY OF THOMAS S. WATSON, JR., C.P.A., WATSON, RICE & CO., CLEVELAND, OHIO Mr. WATSON. Thank you, Senator. I want to thank both yourself and staff and the committee for the opportunity to appear here today. your I would like to introduce myself very briefly by saying that I am the president of a small practice unit called Watson, Rice & Co., which is a C.P.A. firm based in Cleveland and practicing in the Midwest. I am also a member of the Ohio Accountancy Board, the rulemaking body for the State of Ohio, licensing board for the licensing of C.P.A.'s as it relates to public accounting. I am a member of the Small Business Development Committee of the American Institute of C.P.A.'s, a member of the Accounting Personnel Committee of the Ohio Society of C.P.A.'s, recruiting talent to the profession in the State of Ohio, and I am a national director of the National Association of Minority C.P.A. Firms. In consideration of the time, I don't intend to read this full document. In the front of the document is a table of contents that clearly highlights where each of the topics that I expect to talk about are further delineated. I am speaking from my experience as president of Watson, Rice & Co., Inc., and other positions of responsibility in our profession. However, I am not speaking for any of those bodies. I must commend Senator Metcalf and Representative Moss for their efforts. Since this investigative activity began, several good things have happened within our profession. The FASB has scheduled hearings on a codified set of universal accounting principles. The AICPA has established the commission on auditors responsibilities and issued a report of tentative conclusions. The New York Stock Exchange decided to require audit committees. for all its listed companies as of 1978. Several State boards of accountancy have admitted public members, members other than public accountants, to participate in the licensing and rulemaking practices of that State. Interestingly enough, the AICPA has nominated its first black C.P.A. to the board of directors, and he will be elected this fall if there is no opposition. Two major Big Eight C.P.A. firms promoted blacks to partnership. Before that, there was one black partner in a Big Eight firm. However, since your investigation has begun, three blacks were promoted. The job is not completed. However, much has been accomplished. I am here to encourage the Congress to continue to provide motivation for our profession to improve itself. Your encouragement from without and the urging of concerned C.P.A.'s from within should move the leadership of our profession to make the changes and improvements that are in the best interest of all concerned. In observing |