PwC Chief Recommends Adoption of Global Accounting Standards
PricewaterhouseCoopers's chief executive, Samuel DiPiazza, has gone public with his recommendation for a global principles-based set of accounting rules that would replace the current Generally Accepted Accounting Principles (GAAP) in use in the U.S.
In a speech before the National Press Club this week, Mr. DiPiazza extolled the virtues of UK GAAP and International Accounting Standards, describing his vision of a three-tiered corporate reporting structure. His model includes the following levels of reporting:
- A global GAAP based on principles-based reporting instead of rules-based reporting. Accounting firm Grant Thornton has elaborated on this theory of accounting standards in its own Five Point Plan to Restore Public Trust, and has referred to the theory as a "spirit of the law" versus "rule of the law" approach to reporting.
- Standards for measuring and reporting information that are specific to individual industries and that are consistently applied.
- Company-specific information guidelines for items such as strategy, plans, risk management practices, compensation policies, corporate governance, and performance measures.
In addition to the three tiers of the proposed reporting model, Mr. DiPiazza explained that there is a need for three key elements to ensure public trust: transparency, accountability, and integrity. Transparency refers to the identification and reporting of whatever information is needed to make decisions, not merely the minimum statutory reporting requirements. Accountability means that each member of the "corporate reporting supply chain" must be prepared to make a commitment to accountability and responsibility for his or her role in the reporting process. Furthermore, investors have a right to expect that a company hires people of integrity who will "do the right thing."
Mr. DiPiazza explained, "The promise of improving future audits has been constrained by antiquated laws, rigid rules, punitive legal systems that chill innovation in corporation reporting - and also by the auditing profession's reluctance to accept a wider charter that would entail more risk."