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Home > Galleries > The Richard C. Adkerson Galler... > Congress Gets Involved

The Richard C. Adkerson Gallery on the SEC Role in Accounting Standards Setting

Strains on the Partnership

Congress Gets Involved

“The subcommittee’s accounting hearings have produced a broad array of pledges from the accounting profession to reform itself.  However, many witnesses have emphasized that an active SEC is essential to achieving necessary accounting reforms.  Congress originally intended that the SEC would actively exercise its accounting responsibilities, and I believe that the members of this subcommittee realize that the commission is the key to meeting our concern that the public is protected.”

- June 2, 1977 Letter from Senator Lee Metcalf, Chairman of the U.S. Senate Subcommittee on Reports, Accounting and Management, Committee on Governmental Affairs, to SEC Commissioner John R. Evans requesting Mr. Evans testify at hearings on accounting practices

Since the 1970s, Congress has evidenced increasing interest in accounting standards-setting, the accounting profession and oversight by the SEC. Spurred by several business failures including the 1973 collapse of Equity Funding, Congressional subcommittees led by Representative John Moss and Senator Lee Metcalf held hearings and conducted studies that included private sector setting of accounting standards and the role of the SEC.  

The Metcalf subcommittee staff report (The Accounting Establishment) charged that the major firms lacked independence from clients while monopolizing the auditing of large corporations and the standards-setting process.(35) Reports by both the Moss subcommittee and the Metcalf subcommittee staff recommended that the SEC assume directly the accounting standards-setting role for public entities and thus remove the private sector from standards setting.

The SEC retained its oversight role and neither subcommittee produced legislation. However, in 1978, Representative Moss introduced a bill in the House (Public Accountancy Regulatory Act) calling for a group modeled after the NASD and somewhat similar to the Public Company Accounting Oversight Board later established by the Sarbanes-Oxley Act of 2002 (S-Ox).  The bill did not gain sufficient support, but the establishment of the Division of CPA Firms within the AICPA and the Public Oversight Board (POB) were in response to the concerns in the Moss bill.(36)

Congressional investigation of the auditing profession continued, although directed principally to audit quality and independence rather than accounting standards setting. Rep. John Dingell conducted numerous oversight hearings in the mid-1980s.

In the 1980s, Congress began directing the US Government Accountability Office (GAO) to review factors, including audit quality, which led to failures of various businesses, including savings and loan institutions and banks. GAO accounting recommendations were addressed by subsequent FASB statements.

As best exemplified by stock options, Congress has reacted to constituents’ complaints about various FASB proposals, occasionally quite vigorously.(37) S-Ox was the most significant legislation since the 1930s to affect the accounting profession and accounting standards-setting.

As recently as 2009, legislation was proposed in the House to establish a new federal board to approve and oversee accounting principles and standards.(38) That bill gained no traction, but amendments were proposed to the Financial Stability Improvement Act (Dodd/Frank) that would provide that the Financial Services Oversight Council could review and submit comments to the FASB and SEC on existing or proposed accounting standards.

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Footnotes:

(35) December 1976 Summary of the Accounting Establishment - Subcommittee on Reports, Accounting and Management of Senate Committee on Government Operations (Metcalf Committee).

(36) The POB was created in 1977 as an independent private sector body to oversee and report on the programs of the SEC Practice Section (SECPS), also created in 1977 by the AICPA. The POB was the cornerstone of the profession’s self-regulatory system and was succeeded in 2002 by the Public Company Accounting Oversight Board.

(37) It seems likely that Congress will continue try to influence standards-setting when it can. In May 2012, a group of 60 members of Congress warned the FASB of “disastrous consequences” for American businesses and the real estate industry if lease accounting proposals are approved.

(38) H.R. 1349 (111th) Federal Accounting Oversight Board of 2009.

Related Museum Resources

Papers

1975
Report of the AICPA Special Committee on Equity Funding: The Adequacy of Auditing Standards and Procedures Currently Applied in the Examination of Financial Statements
image pdf (AICPA Collection, University of Mississippi)
March 26, 1976
Reply letter from SEC Commissioner Philip A. Loomis, Jr. to Richard Thornburgh, Department of Justice on SEC investigations of improper payments
transcript pdf (Courtesy of the National Archives and Records Administration)
September 22, 1976
Testimony of the American Institute of Certified Public Accountants on H.R. 15481 before the Subcommittee on Consumer Protection and Finance of the Committee on Interstate and Foreign Commerce, U.S. House of Representatives
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
October 1976
Conclusions and Recommendations of Federal Regulation and Regulatory Reform - Report by the Subcommittee on Oversight and Investigations of the House Committee on Interstate and Foreign Commerce (Moss Subcommittee)
transcript pdf (AICPA Collection, University of Mississippi)
December 1976
Summary of the Accounting Establishment - Subcommittee on Reports, Accounting and Management of Senate Committee on Government Operations (Metcalf Committee)
transcript pdf (AICPA Collection, University of Mississippi)
January 27, 1977
Letter from Senator William Proxmire to Marshall Armstrong, Financial Accounting Standards Board on proposed loan write-downs
image pdf (JT Ball Collection, University of Mississippi)
February 14, 1977
Reply from Marshall Armstrong to William Proxmire
image pdf (JT Ball Collection, University of Mississippi)
April 12, 1977
"The Accounting Profession and the SEC: A Partnership Under Attack," Address by SEC Commissioner John R. Evans to Cincinnati Chapter, Ohio Society of Certified Public Accountants
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
April 14, 1977
Financial Accounting Foundation and Financial Accounting Standards Board Statement of Position on "The Accounting Establishment"

(JT Ball Collection, University of Mississippi)

April 20, 1977
Letter from Klaus Heiss, ECON Inc. to Stuart Eizenstat on indexing of all depreciation costs
image pdf (Courtesy of the Jimmy Carter Library and Museum)
April 21, 1977
Statement of Alva O. Way, Financial Accounting Foundation before Senate Hearings on Accounting and Auditing Practices and Procedures
image pdf (JT Ball Collection, University of Mississippi)
April 21, 1977
Statement of Marshall Armstrong, Financial Accounting Standards Board before Senate Hearings on Accounting and Auditing Practices and Procedures
image pdf (JT Ball Collection, University of Mississippi)
June 2, 1977
Letter from Senator Lee Metcalf, Chairman of the U.S. Senate Subcommittee on Reports, Accounting and Management, Committee on Governmental Affairs, to SEC Commissioner John R. Evans requesting Mr. Evans testify at hearings on accounting practices.
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 1977
Improving the Accountability of Publicy Owned Corporations and Their Auditors - Report of the Subcommittee on Reports, Accounting and Management, U.S. Senate Committee on Governmental Affairs (Metcalf Report)
image pdf (AICPA Collection, University of Mississippi)
January 4, 1978
"Professional Self-Governance: An Interim Report" - Address by SEC Chairman Harold M. Williams to AICPA
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
February 16, 1978
Request from U.S. Representative John E. Moss to SEC Commissioner John R. Evans to testify as part of the House investigation into the organization and reform measures of the American Institute of Certified Public Accountants
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
March 3, 1978
"The State of the Securities and Exchange Commission - 1978" - Address by SEC Chairman Harold M. Williams to The SEC Speaks in 1978
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
April 19, 1978
Response of the Financial Accounting Standards Board and Financial Accounting Foundation to inquiry from Senator Thomas Eagleton
image pdf (JT Ball Collection, University of Mississippi)
April 24, 1978
Financial Accounting Standards Board letter to SEC Chaiman Harold Williams with materials on improving accounting standards
image pdf (JT Ball Collection, University of Mississippi)
May 8, 1978
"Progress Toward Professional Self-Governance: An Update" - Address by SEC Chairman Harold M. Williams to the AICPA Council
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
July 1, 1978
SEC Report to Congress on the Accounting Profession and the Commission's Oversight Role
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
August 22, 1978
"The Changing World of the Accountant: Where the Next Steps Should Lead" - Address by SEC Chairman Harold M. Williams to the American Accounting Association
image pdf (Government Records)
September 30, 1978
44th Annual Report of the Securities and Exchange Commission
image pdf (Government Records)
December 8, 1978
"Improving the Accounting Profession: A Shared Responsibility," Address by SEC Commissioner John R. Evans to 8th Annual SEC Conference, Florida Institute of Certified Public Accountants
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
January 9, 1979
"The Accounting Profession: Responses to an Environment of Change" - Address by SEC Chairman Harold M. Williams to the AICPA
image pdf (Government Records)
February 28, 1979
"The SEC, the Accounting Profession, and Self-Regulation," Address by SEC Commissioner John R. Evans as part of the Distinguished Speaker Series, Department of Accounting, University of Kentucky
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
September 25, 1979
"The Vital Role of State Boards of Accountancy," Remarks by SEC Commissioner John R. Evans to National Association of State Boards of Accountancy 72nd Annual Meeting
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 19, 1979
"Current Developments Affecting Small Business and Small and Medium-Sized Accounting Firms," Remarks of SEC Commissioner Philip A. Loomis, Jr. to the Foundation for Accounting Education, New York State Society of CPAs Annual SEC Accounting Conference
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
August 1980
SEC Report to Congress on the Accounting Profession and the Commission's Oversight Role - Part I (pages 1-41)
image pdf (Courtesy of the Library of Congress)
September 30, 1980
46th Annual Report of the Securities and Exchange Commission
image pdf (Government Records)
November 3, 1980
"Accounting and Financial Reporting - The Challenges of the 1980s" - Address by SEC Chairman Harold M. Williams to the New York State Society of Certified Public Accountants
image pdf (Government Records)
September 30, 1982
48th Annual Report of the Securities and Exchange Commission
image pdf (Government Records)
March 25, 1983
Statement of John S.R. Shad, SEC Chairman, to the Subcommittee on Securities of the Senate Committee on Banking, Housing and Urban Affairs
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
September 30, 1983
49th Annual Report of the Securities and Exchange Commission
image pdf (Government Records)
July 31, 1984
John J. McCloy Comments on Self-Regulatory Program of Accounting Profession
image pdf (Courtesy of the American Institute of Certified Public Accountants)
September 30, 1984
50th Annual Report of the Securities and Exchange Commission
image pdf (Government Records)
February 11, 1985
Letter from Representative John Dingell to Donald Kirk, Financial Accounting Standards Board requesting report on setting accounting standards
image pdf (JT Ball Collection, University of Mississippi)
February 20, 1985
Statement of the Financial Accounting Standards Board to the Subcommittee on Oversight and Investigations, House Committee on Energy and Commerce
image pdf (JT Ball Collection, University of Mississippi)
June 7, 1985
Letter from Donald Kirk, Financial Accounting Standards Board to Representative John Dingell with FASB Summary of Statements of Financial Accounting Standards Nos. 1 to 85

(JT Ball Collection, University of Mississippi)

July 12, 1985
Statement of the Financial Accounting Standards Board to the Subcommittee on Oversight and Investigations, House Committee on Energy and Commerce
image pdf (JT Ball Collection, University of Mississippi)
September 30, 1985
51st Annual Report of the U.S. Securities and Exchange Commission
image pdf (Government Records)
November 7, 1985
Statement of the Financial Accounting Standards Board to the Subcommittee on Oversight and Investigations, House Committee on Energy and Commerce
image pdf (JT Ball Collection, University of Mississippi)
April 24, 1986
Statement of the Financial Accounting Standards Board to the Subcommittee on Oversight and Investigations, House Committee on Energy and Commerce
image pdf (JT Ball Collection, University of Mississippi)
June 23, 1986
Statement of SEC Chairman John S.R. Shad concerning financial reporting and the role of the independent auditor before the Subcommittee on Oversight and Investigations of the House Committee on Energy and Commerce
image pdf (Courtesy of Stuart Kaswell)
September 30, 1986
52nd Annual Report of the U.S. Securities and Exchange Commission
image pdf (Government Records)
March 23, 1987
Letter from U.S. Representative John Dingell to SEC Chairman John S.R. Shad on financial disclosures by defense contractors
transcript pdf (Courtesy of Stuart Kaswell)
April 15, 1987
Letter from Dennis Beresford, Financial Accounting Standards Board to Representative John Dingell on evaluating initiatives to establish regulatory accounting requirements
image pdf (JT Ball Collection, University of Mississippi)
September 30, 1987
53rd Annual Report of the U.S. Securities and Exchange Commission
image pdf (Government Records)
August 26, 1988
Letter from Representative John Dingell to SEC Chairman David Ruder regarding August 3rd Wall Street Journal article on purported SEC overhaul of FASB
image pdf (JT Ball Collection, University of Mississippi)
September 30, 1988
54th Annual Report of the U.S. Securities and Exchange Commission
image pdf (Government Records)
February 21, 1989
Statement of Philip B. Chenok, AICPA before House Committee on Banking, Finance and Urban Affairs
image pdf (JT Ball Collection, University of Mississippi)
February 21, 1989
The Need to Improve Auditing in the Savings and Loan Industry - Statement of Frederick D. Wolf, U.S. General Accounting Office before House Committee on Banking, Finance and Urban Affairs
image pdf (JT Ball Collection, University of Mississippi)
September 30, 1989
55th Annual Report of the U.S. Securities and Exchange Commission
image pdf (Government Records)
September 30, 1990
56th Annual Report of the U.S. Securities and Exchange Commission
image pdf (Government Records)
September 30, 1991
57th Annual Report of the U.S. Securities and Exchange Commission
image pdf (Government Records)
September 30, 1992
58th Annual Report of the U.S. Securities and Exchange Commission
image pdf (Government Records)
October 28, 1993
Testimony of Marianne K. Smythe, Director, SEC Division of Investment Management concerning Small Business Incentive Act of 1993
image pdf (Anonymous)
September 30, 1995
61st Annual Report of the U.S. Securities and Exchange Commission
image pdf (Government Records)
March 20, 1997
Letter from Senator Phil Gramm to Dennis Beresford, Financial Accounting Standards Board on accounting principles regarding financial derivatives and hedging activities
image pdf (JT Ball Collection, University of Mississippi)
March 25, 1997
Reply from Dennis Beresford to Senator Phil Gramm
image pdf (JT Ball Collection, University of Mississippi)
May 13, 1997
Letter from Representative Michael Oxley to Dennis Beresford, Financial Accounting Standards Board on accounting for derivatives
image pdf (JT Ball Collection, University of Mississippi)
April 17, 2000
Letter to SEC Chairman Arthur Levitt from U.S. House Committee on Commerce with questions on accounting practice
image pdf (With permission of Arthur Levitt Papers, Rare Book & Manuscript Library, Columbia University in the City of New York)
May 2, 2000
Letter to U.S. Senator Phil Gramm from SEC Chairman Arthur Levitt on oversight of Financial Accounting Standards Board
image pdf (With permission of Arthur Levitt Papers, Rare Book & Manuscript Library, Columbia University in the City of New York)
May 31, 2000
Letter to SEC Chairman Arthur Levitt from U.S. Representatives Henry Waxman and Edward Markey on oversight of accounting profession
image pdf (With permission of Arthur Levitt Papers, Rare Book & Manuscript Library, Columbia University in the City of New York)
July 17, 2000
Letter to U.S. Senator Robert Bennett from SEC Chairman Arthur Levitt on regulation of accounting profession
image pdf (With permission of Arthur Levitt Papers, Rare Book & Manuscript Library, Columbia University in the City of New York)
November 2000
Constituent letter from U.S. Representative Richard Armey on SEC proposed auditor independence requirements rule
transcript pdf (Richard K. Armey Papers, courtesy of the Carl Albert Congressional Research and Studies Center, University of Oklahoma, Norman, Oklahoma)
September 30, 2008
Letter from members of the U.S. House of Representatives to SEC Chairman Christopher Cox requesting the suspension of the use of fair value accounting or "mark to market"
image pdf (Courtesy of an anonymous donor)

Oral Histories

07 November 2005

Aulana Peters

With Dr. Kenneth Durr
07 July 2005

A. Clarence Sampson

With Ernest Ten Eyck
01 October 2001

A.A. Sommer, Jr.

With Richard Phillips
13 April 2011

Jerry Sullivan

With Dr. James Stocker

Galleries

In the Midst of Revolution: The SEC, 1973-1981
Towards Accounting Self-Regulation

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