Synopsis

Each new reform adopted in response to the latest scandal imposes additional costs on global companies. George O. May warned Congress in 1933: “All these things are a question of balancing risks against the cost. If you erect machinery of protection that is too expensive you will kill industry.” Accountants have struggled throughout history to provide relevant and reliable financial information at a reasonable cost. Many times they succeeded. Too often they failed. Future accountants must find cost-effective ways to correct today’s financial reporting weaknesses and address tomorrow’s inevitable accounting scandals.

Discussion Questions

1. Cite examples of financial disclosures that were uncommon during the 1920s but are mandatory today.
2. Cite examples of accounting rules that were adopted in response to financial scandals.
3. How do modern auditing procedures differ from those employed 80 years ago?
4. How did auditors’ responsibility for financial statement fraud evolve between 1892 and today?
5. How have public accounting firms changed during the last 50 years?
6. How did the Sarbanes-Oxley Act of 2002 reduce certified public accountants’ professional autonomy?