Academic journal article Journal of Accountancy

AICPA Banking Conference: Future of Banking System and Accountants' Role

Academic journal article Journal of Accountancy

AICPA Banking Conference: Future of Banking System and Accountants' Role

Article excerpt

The sixteenth annual American Institute of CPAs Conference on Banking, held recently in Washington, D.C., looked at mounting problems facing banks and savings and loans and at what accountants and auditors should--and should not--be asked to do to restore the system's health.

According to Charles A. Bowsher, comptroller general of the United States, "We have a serious problem and it's not going to be easy to fix." At the start of fiscal year 1989, he said, both the Federal Savings and Loan Insurance Corporation and the Federal Deposit Insurance Corporation (FDIC) had positive cash flows; now these insurance funds average an outflow of over $50 billion a year to depositors--and indications are next year the figure will be even higher.

Bowsher reported Congress is being asked to fund an additional $80 billion for the Resolution Trust Corporation, which oversees the S&L bailout, in addition to the $80 billion appropriated since the S&L crisis began, and to raise the working capital fund to $160 billion. On the banking side, Congress has been asked to approve a new $70 billion loan to the FDIC.

"When you add up all the numbers, Congress is being asked to appropriate over $300 billion," Bowsher said. "That's the equivalent of defense spending, the largest item in the budget."

The General Accounting Office is supporting banking legislation to strengthen accounting and financial reporting standards.

Bowsher said he would like the Financial Accounting Standards Board to issue rules leading to financial reporting of the current value of assets held by financial institutions (see story above). In addition, he would like to see managements of banks with assets over $150 million document the state of their internal control systems, with the findings reviewed by auditors and published in annual reports. Bowsher also urged better coordination among management, regulators and auditors.

Accounting changes debated. …

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