Magazine article The CPA Journal

Is the Public Accounting Profession in Decline?

Magazine article The CPA Journal

Is the Public Accounting Profession in Decline?

Article excerpt

Personal Perspective

How to answer the question: "Is the public accounting profession in decline?" Input from executives, financial analysts, underwriters, and others who have direct contact with CPAs who perform the attest function are helpful, but here I'm going to try a different perspective: focusing on the public comments of the regulatory agencies responsible for public accounting in the United States.

Early efforts. In an 1889 address, James Yalden, then president of the American Association of Public Accountants (an ancestor of the AICPA), noted:

On the occasion of this our first annual gathering since the organization of our association, I have to congratulate the members on the success it has so far attained ... a success which has enabled us to bring the profession of accountancy prominently before the public.

President Yalden was putting a positive spin on the situation at that time, but he did go so far as to say, "[O]ur association is not stronger in numbers. At the time of his address, the association had 25 fellows and seven associates. Five years later it had 48 fellows and 17 associates. Noted accounting historian Norman Webster's early papers documenting the history of the American Institute of Accountants note that annual elections were not held in 1889, 1890, and 1891, and confirm that membership during those years did not increase.

Meanwhile, initial efforts to enact a CPA law in New York State were unsuccessful. Webster's papers note that after the failure, the legislation committee sent each member of the state legislature a letter stating:

Our Bankers, Merchants, Railroad and other Corporations, in fact, all persons engaged in business operations, have become impressed with the necessity of the establishment of a body of competent Public Accountants, whose examinations and investigations can be relied on for impartiality, ability and thoroughness.At present there is no law whatsoever governing and restricting the members or this profession, anyone no matter how ignorant or incapable can arrogate to himself the title and pose before the public as a professional accountant.

The progress made between this time and the enactment of the Securities Exchange Act of 1934 reflects the success of the early accountants working for professional status, and the perception of the public accounting profession appeared to be highly positive. In The Rise of the Account ing Profession, John L. Carey notes; "There was a strong movement toward acceptance of responsibility for the promulgation of standards of general application." Carey's book includes testimony from Col. Arthur H. Carter, then NYSSCPA president, who spoke before a Senate committee in early 1933 and proposed that the law being drafted include an audit provision.

The SEC's attitude. The first Securities and Exchange Commission concluded that the public accounting profession could be responsible for its own direction and deemed public accountants to be adhering to the responsibilities accepted by professionals. The SEC had authority to prescribe accounting principles and methods but, undoubtedly impressed with the profession's progress in its self-improvement, self-regulation, and code of conduct, delegated this regulatory authority

Carey notes reservations were expressed when the requirements of the 1934 Act were implemented. In a 1937 address, one of the early commissioners, George Mathews, stated:

I think that a governmental agency should frame rules to govern the exercise of professional functions only when the need for such rules has been shown to be of real public importance. Mere preference of the administrative agency for one method or form is not a sufficient reason for taking the formulation of principles and practices out of the hands of the members of a profession, and where the profession gives evidence of its capacity and willingness to develop and apply proper methods without evasion or undue delay, it should be encouraged to take on the responsibility. …

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