Synopsis

The history of public accounting can be described as a series of scandals followed by voluntary or mandated reforms. This chapter provides an overview of the book. It describes how various accounting scandals led to mandatory audits of public companies, changes to accounting standards and financial reporting requirements, and improvements in auditing techniques.

Discussion Questions

1. How did President Franklin Delano Roosevelt respond to Ivar Kreuger’s investment scam?
2. What reforms did accounting firms adopt following the Congressional hearings convened by Senator Lee Metcalf and Representative John Moss during the late 1970s?
3. How did the Federal Deposit Insurance Corporation Improvement Act of 1991 influence American auditing and financial reporting?
4. Have American auditors always accepted responsibility for detecting and reporting their clients’ financial statement fraud?
5. What did SEC chairman Arthur Levitt conclude from Arthur Andersen’s audit failures at Sunbeam and Waste Management? How did Chairman Levitt respond?
6. How did the Sarbanes-Oxley Act of 2002 influence American auditing and financial reporting?
7. What changes in auditing and financial reporting practices did American accountants and regulators adopt following the financial crisis of 2007-2009?
8. What reforms have countries such as Canada, Australia, and Japan adopted since 2000 to combat financial accounting fraud?

Additional Resources

Events That Shaped a Century This 2005 Journal of Accountancy article describes events that shaped the American accounting profession.