Back in November of 2003, fifty-seven men and women, including leaders from the worlds of accounting, finance, law, academia, investment banking, journalism, non-governmental organizations, as well as the current and former regulatory officials gathered together for the 103rd American Assembly entitled "The Future of the Accounting Profession."
Over the course of the Assembly, the distinguished professionals considered three broad areas of the accounting profession: its present state, its desired future state, and how it might reach that future state.
Never, in its lengthy history, has the accounting profession been required to deal with the kinds of challenges that it must confront today. A seemingly unending series of sensational accounting scandals has grabbed newspaper headlines over the last three years, eroding public confidence in the accounting profession and leading to the most sweeping amendments to United States securities law since the Securities Act was passed by Congress in 1934. The Sarbanes-Oxley Act of 2002, as well as the Public Company Accounting Oversight Board (PCAOB) established as a result of the Act, now force the profession – and all of those who rely on its services – to rethink its most fundamental principles and practices.
The members discussed the challenges and changes that must follow of all those affected by the scandals, including present and former regulators, investment analysts, money managers, investment bankers, chief executive officers of major corporations, scholars and accounting professionals.
As a group, they were generally satisfied with the new regulatory trends and the moves by corporate America toward reforming its own practices. The group also stated that the accounting industry is moving to improve its own business, after acknowledging that auditors have far too often yielded to management pressure to paint the most favorable picture possible of a corporation’s financial health.
The conference attendees believe that too much may be demanded of the auditing process. Auditing financial statements, by definition, requires more judgment and more subjectivity than has been recognized. It is unrealistic to now demand a greater degree of certainty.
However great the risks of this strategy appear, they believe that a failure to move in this direction carries with it still greater hazards. The profession already suffers from a loss of confidence. That has contributed, in turn, to a loss of confidence in the financial integrity of our corporations and put at risk the bedrock of the financial system.
To ensure that auditors are best-positioned to employ their best judgment and to ensure that financial statements abide by the spirit as well as the letter of the law, the group believes that corporate boards must take steps to guarantee the independence and integrity of the auditing process, both internally and externally, by appointing qualified audit committee members who will take full control of that audit process.
In a closing statement the group strongly recommended that the industry take a hard look at the way it deals with the recruiting, retaining, and compensation of audit professionals.
Just some of the topics covered in the report are:
- The Value of the Audit
- Regulation and Oversight in Flux
- What Went Wrong?
- Structural Challenges Facing the Accounting Profession
- What Should Financial Reporting Look Like in the Future?
- Improving Auditing and Financial Reporting Standards
- Licensing Issues: More Firms, More Depth
You may view the entire report the Future of the Accounting Profession