“Accounting – the process of identifying, measuring, and communicating economic information to permit informed judgements and decisions by users of the information.” (Warren, Reeve, & Fess, 1999, p. 5). Accounting, as so many other occupations has a rich history behind it, as well as it’s own language. Throughout this rich history it is clear to see that certain organizations relating to the accounting profession have made significant strives to improve the reliability and accuracy of what is reported. These organizations ensure that there is a framework for standards which accountants use in today’s world to speak this common language of business. The organizations, which have provided this framework, are the American Institute of Certified Public Accountants, Securities and Exchange Commission, Federal Accounting Standards Board, Government Accounting Standards Board, and International Accounting Standards Committee. Each organization plays a major role in defining rules and guidelines to ensure uniformity throughout the profession. One such organization is the American Institute of Certified Public Accountants (AICPA). The history of this organization dates back to 1887, when the American Association of Public Accountants was formed. In 1916, the American Association was succeeded by the Institute of Public Accountants. In 1957, the name was finally changed to what we now know it as today, the American Institute of Certified Public Accountants. “The American Institute of Certified Public Accountants is the national, professional organization for all Certified Public Accountants. Its mission is to provide members with the resources, information, and leadership that enable them to provide valuable services

Accounting 3 in the highest professional manner to benefit the public as well as employers and clients.” (AICPA Online, 1999, AICPA Mission Statement) AICPA currently has over 328,000 members, which make up 41.7% in industry, 40.7% in public practice, 2.4% in education, 4.4% in government, and 10.8% miscellaneous or retired. AICPA’s current objectives are as follows: serves as the national representative of CPAs before governments, regulatory bodies and other organizations in protecting and promoting members' interests, seeks the highest possible level of uniform certification and licensing standards, and promotes and protects the CPA designation. It promotes public awareness and confidence in the integrity, objectivity, competence and professionalism of CPAs, monitors the needs and views of CPAs, encourages highly qualified individuals to become CPAs, supports the development of outstanding academic programs, and establishes professional standards. Through these actions the AICPA assists members in continually improving their professional conduct, performance and expertise. The AICPA currently consists of three bodies. These bodies include the Governing Council, Board of Directors, and the Joint Trial Board. The Governing Council’s top objective is to determine Institute programs and policies. This council meets twice a year and has over two hundred and sixty members, with representatives from every state and U.S. territory. The Board of Director’s top objective is to act as an executive committee of council, directing Institute activities between council meetings. The board consists of 23 members. The Joint Trial Board’s top objective is to provide for uniform enforcement of professional standards by adjudicating charges against state society and AICPA
Accounting 4 members. The Institute also has numerous committees and boards which include Accounting and Review Services Committee, Accounting Standards Executive Committee, AICPA Peer Review Board, Auditing Standards Board, Board of Examiners, just to mention a few. AICPA is currently working with many different issues. One issue, which they are currently working on, is a way to detect management fraud through the use of audits. They hope to create a list of red flags, which will help auditors dig deeper in to detecting and reporting fraud. “The AICPA has promised to deliver its list of red flags by early next year. Once it does, companies should get an idea of just how tough audits might become. “ (McComas, 1986, p. 56) Another issue that the AICPA is involved with is evaluating web sites, to ensure they meet all the critia for online business. “To gain the CPA Web Trust seal, a company must disclose its business practices and ensure that transaction integrity and all information are protected.” (Accountants band together, 1997, p. 32) The AICPA also recently released a draft of a completely revised audit and accounting guide for investment companies. This proposed guide would provide new guidance on accounting for offering costs, amortization of premiums and discounts on bonds, liabilities for excess expense plans, and reporting of complex capital structures. The Securities and Exchange Commission (SEC) also has played an important role in the accounting profession. Congress established the SEC under the Securities Exchange Act of 1934. The SEC is an independent regulatory agency with responsibility for administrating federal securities laws. The purpose of the SEC is to protect investors through the use of these laws in the securities markets. They do this by ensuring that the

Accounting 5

securities markets operate fairly and that investors have access to disclosure of all material information concerning publicly traded securities. Some of the laws which assist the SEC in accomplishing their job are, Securities Act 1933, Securities
Exchange Act 1934, Investment Company Act 1940, Investment Advisor Act 1940, Public Utility Holding Company Act of 1935, and the Trust Indenture Act 1939. The Commission is composed of five members appointed by the President, with the advice and consent of the Senate. The SEC is broken into five main divisions. These divisions are: Division of Corporate Finance, Market Regulation, Investment Management, Enforcement, and Office of Compliance Inspections and Examination. The SEC plays a major role in the accounting profession because this is where a company’s information comes from to be shared with the securities markets. A current issue, which the SEC is working on, is re-examining the regulation of the U.S. securities markets in light of technological developments. The SEC is looking at activities of two types of entities: (1) trading systems that present alternatives to traditional exchange trading; and (2) foreign markets, broker-dealers, and other entities that provide investors in the U.S. with direct electronic links to foreign markets. The SEC is also working in the international arena to promote cooperation and assistance, and to encourage the adoption of high regulatory standards. An ongoing issue which the Commission is always pursuing are any possible violations of the federal securities laws, which would result in them taking significant sanctions against securities law violators.

Accounting 6
One such occurrence this past year was “On December 22, the SEC sued W.R. Grace & Co. for fraud, alleging that the chemical company diverted up to $20 million of 1991 and 1992 earnings into reserves. “ (Byrnes & Barrett, 1999, p. 45) SEC has made it clear that they are not going to accept these types of violations, and will take action against companies who would mislead shareholders. Recently the SEC has put out a joint interagency letter to financial institutions that reaffirmed the importance of crediable financial statements and meaningful disclosure to investors. The SEC plans to address this issue by establishing a joint working group with the Federal Deposit Insurance Corporation, Federal Reserve Board, Office of the Comptroller of the Currency, and the Office of Thrift Supervision. The joint working group will research and receive inputs from the banking industry and the accounting profession to provide better guidance on appropriate procedures, documentation, and disclosures to the banking industry. This joint task force will also be working very closely with the AICPA and the FASB to encourage these institutions to help assist in the development of guidance dealing with this issue. Federal Accounting Standards Board (FASB) is another organization, which plays a major role in defining rules and guidelines to ensure uniformity throughout the accounting profession. The FASB was founded in 1973, to establish standards of financial accounting and reporting in the private sector. The mission of the Financial Accounting Standards Board is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information. The FASB consists of seven members who
Accounting 7 serve full time and must process knowledge of accounting, finance, and business. The key objectives of the FASB are to improve the usefulness of financial reporting by focusing on the primary characteristics of relevance and reliability, to keep standards current to reflect changes in methods of doing business, to consider promptly any significant areas of deficiency in financial reporting that might be improved, to promote the international comparability of accounting standards, and to improve the common understanding of the nature and purpose of information contained in financial reports. The FASB is always working on research aimed at gaining new insights and ideas in which to apply to new concepts and standards in accounting. One issue, which the FASB is working on, is “a proposal for public comment that would provide a framework for using future cash flows as the basis for an accounting measurement. The proposed
Concepts Statement would provide general principles governing the use of present value, especially when the amount of future cash flows, they’re timing, or both are uncertain. It also would provide a common understanding of the objectives of present value in accounting measurements.” (FASB Online, 1999, News Release) The FASB puts out different products to assist individuals in keeping abreast of these current standards and concepts. These products include the FASB Staff Implementation Guide, Financial Accounting Research System, Original Pronouncements, Emerging Issues Task Force (EITF) Abstracts and Issue Summaries, etc. Another issue that the FASB is currently pursuing, is a proposal for public comment that would resolve practice issues raised when accounting for stock options. Their key concern is to ensure that when an option is repriced, that the option is accounted for as a variable plan from the time it is repriced to

Accounting 8

the time it is exercised. The Government Accounting Standards Board (GASB) was organized in 1984 by the Financial Accounting Foundation to establish standards of financial accounting and reporting for state and local government entities. The mission of the GASB is to establish and improve standards of state and local government accounting to result in useful information for users of the financial reports, and to guide and educate the public. The GASB accomplishes its mission by issuing standards that improve the usefulness of financial reports based on the needs of financial report users. They keep standards current to reflect changes in the government structure. They provide guidance on implementation of standards. The GASB considers significant areas of accounting and financial reporting that can be improved. They strive to improve the common understanding of the nature and purposes of information contained in financial reports. The GASB is made up of a professional staff drawn from government and public accounting. The staff works directly with the Board and it’s task forces to conduct research, participate in public hearings, and to analyze oral and written comments received from the public. A current issue which the GASB is involved with is a requirement to make state and local governments report the value of their investments at “fair value,” rather than at the actual cost of accounting. The GASB claims that, “Fair value reporting provides financial statement users with better information to asses accountability, the level of services a government can provide and the government’s financial condition.” (Finden, 1996, p. 8) The GASB is also working on a project, which constitutes a broad
Accounting 9 re-examination of note disclosures required by GASB standards, and whether these disclosures effectively meet the information needs of users of government financial statements. They have also started an initiative to develop a final Concepts Statement, which will primarily establish definitions for key financial statement elements (for example, assets, liabilities, revenues, expenses, and expenditures). The GASB is also working on a way to help track nonexchange transactions. “In a nonexchange transaction, the government gives or receives value without directly receiving or giving equal value in exchange. When the transaction should be recognized in the financial statements.” (GASB Online, 1999, News Release) These nonexchange transactions include taxes, grants, and donations. The International Accounting Standards Committee (IASC) is an organization who’s main objective is to achieve uniformity in the accounting principles that are used by businesses and other organizations for financial reporting around the world. The organization was created in 1973 through an agreement made by professional accountancy bodies from Australia, Canada, France, Germany, Japan, Mexico, the
Netherlands, the United Kingdom, Ireland, and the United States. The IASC has over 2,000,000 members worldwide. The IASC board consists of thirteen country members and four additional organizational members. The key reasons that the IASC was formed was due to preparation costs for financial reports that were much higher than necessary. A multinational company would have to prepare different reports on its operations for use in different countries. It was also due to businesses, which needed to have a uniform system for assessing financial performance in their operations in different
Accounting 10 countries. They would also want their external reports to be consistent with internal assessments of performance. These two objectives would not have been achievable if accounting standards were to have varied from country to country. The IASC’s key objectives are “to formulate and publish in the public interest accounting standards to be observed in the presentation of financial statements and to promote their worldwide acceptance and observance. They also hope to work for the improvement and harmonization of regulations, accounting standards and procedures relating to the presentation of financial statements.” (IASC Online, 1999) Currently the IASC is working on projects to determine which assets and liabilities are discounted (measured at present value) and how present value should be determined. They are proposing amendments to existing International Accounting Standards. Such amendments may make existing requirements more detailed, amend existing requirements, or remove explicit or implicit choices. The IASC is in the process of “trying to persuade as many companies as possible to adopt its standards, and to convince securities regulators such as the SEC to let such firms list on their stock exchanges.”
(A Hill of Beans, 1998) The IASC’s goal is to try and get the SEC to endorse their standards, and allow for a global capital market to exist. The IASC is also looking at how companies report financial information, and the different programs and formats used to deliver company information to the public. They are working on coming up with a standard to ensure that the public will have full access to the information in a uniform format. The IASC has formed a working group that is in the process of developing guidelines for when a company should adjust its financial statements for events after the
Accounting 11 balance sheet date. The IASC is also working on many other projects through working groups to develop standards for consolidating companies, emerging markets, investment properties, insurance, extractive industries, agriculture, employee benefits, impairment of assets, and provisions, contingent liabilities and contingent assets. One issue which each of these organizations has in common is the Y2K problem. These organizations have set up task forces, research groups and various committees to ensure that the accounting community is ready for the new century. They have ensured this by issuing guidance and standards by which the business community should prepare for this event. These organizations play a key role in ensuring that businesses are ready for the Y2K problem, and inturn ensuring that the global markets are not devastated by this historic event. Each and every one of these organizations assists in laying the framework for the Accounting profession. They do this by providing standards, which results in a common standard by which the language of business can be spoken. It is crucial to have this common language as the world develops into a global commerce. Each organization plays a major role in defining rules and guidelines to ensure uniformity throughout the profession. These organizations ensure that the rich history of the accounting profession is preserved, and that the nature of the profession and the purpose remains seen. Therefore the highest standards will be maintained. Without these standards the global markets will not succeed because individuals around the world will not be able to trust the information that they are given about a business and therefor the world will never reach a common playing ground.

References

A Hill of Beans. (1998, January, 17). The Economist. p. 16 (1).

AICPA Online (1999). Summanry of AICPA Operations. Available: http://www.aicpa.org/about/summary.html.

Accountants band together for safe transactions. (1997, September 29). PC Week,
p. 32 (1)

Byrnes, N. & Barrett, A. (1999, January 11). BUSTING UP A BALANCE SHEET GAME. Business Week, p. 45 (1).

FASB Online (1999). FASB Proposal to Address Present Value Accounting. Available: http://www.rutgers.edu/Accounting/raw/fasb/news/nr33199b.html.

Finden, R. (1996, October 11). GASB finalizing new standards: fair value is more accurate barometer of financial health. American City & Country, p. 8 (1)

GASB Online (1999, January 6). GASB Issues Statement 33 on “Nonexchange” transactions. Available: www.rutgers.edu/Accounting/raw/gasb/news/nr1699.html.

IASC Online (1999). The need for International Accounting Standards. Available: http://www.iasc.org.uk/frame/cen1_4.htm.

McComas, M. (1986, August 18). How Accountable the accountants? They are bowing to congressional pressure to expand their responsibility for detecting fraud. Fortune, p. 56 (1).

Warren, C. S., Reeve, J. M., & Fess P. E. (1999 ). Accounting (19th Edition). Cincinnati, OH: South-Western College Publishing.