NCJ Number
65582
Date Published
1977
Length
62 pages
Annotation
THIS TESTIMONY BEFORE THE SENATE SUBCOMMITTEE ON REPORTS, ACCOUNTING, AND MANAGEMENT TRACES THE HISTORY OF THE SECURITIES AND EXCHANGE COMMISSION'S RELATIONSHIP WITH THE PRIVATE ACCOUNTING SECTOR AND RECOMMENDS REFORM.
Abstract
UNDER THE 1933 AND 1934 SECURITIES ACTS, THE SECURITIES AND EXCHANGE COMMISSION (SEC) WAS GIVEN THE RESPONSIBILITY FOR SETTING AND ENFORCING STANDARDS FOR CORPORATE FINANCIAL REPORTING; HOWEVER, THE SEC ALMOST IMMEDIATELY TRANSFERRED THIS AUTHORITY IN EFFECT TO A PRIVATE ACCOUNTING BODY, THE AMERICAN INSTITUTE OF ACCOUNTANTS. FROM THAT TIME UNTIL THE PRESENT, ACCOUNTING STANDARDS FOR CORPORATE BODIES HAVE BEEN PROMULGATED BY PRIVATE SECTOR ACCOUNTING BODIES, MOST RECENTLY THE FINANCIAL ACCOUNTING STANDARDS BOARD. THIS HISTORY OF A COOPERATIVE RELATIONSHIP BETWEEN THE SEC AND PRIVATE FINANCIAL ACCOUNTING GROUPS HAS PRODUCED A TRADITION OF CONSENSUS DECISIONMAKING AND REGULATION IN THE SEC'S INTERACTION WITH THE PRIVATE SECTOR IT WAS CREATED TO REGULATE. THE STANDARDS FOR CORPORATE FINANCIAL REPORTING THAT HAVE EMERGED FROM SUCH A NETWORK HAVE SERVED PRIMARILY THE INTERESTS OF CORPORATE BODIES IN REPORTING TO THEIR INVESTORS, RATHER THAN THE INTERESTS OF THE FEDERAL GOVERNMENT IN THE PRODUCTION OF DATA RELEVANT TO POLICY ANALYSIS. THE CREATION OF STANDARDS FOR CORPORATE FINANCIAL REPORTING THAT WILL MEET THE NEEDS OF FEDERAL POLICYMAKING AND ULTIMATELY SERVE THE PUBLIC INTEREST WILL REQUIRE THE ESTABLISHMENT OF AN INDEPENDENT GOVERNMENT BODY THAT WILL SET UNIFORM ACCOUNTING STANDARDS ORIENTED TOWARD GOVERNMENT POLICY RESPONSIBILITIES. THE LONG TRADITION OF THE SEC'S STYLE OF OPERATION MAKES IT UNLIKELY THAT IT COULD ASSUME SUCH A RESPONSIBILITY.