Synopsis

The Financial Accounting Standards Board (FASB) begin writing American financial reporting rules in 1973. Accountants hoped the new smaller board consisting of paid, full-time members with more diverse backgrounds would be more successful than the CAP and APB. Accountants adopted peer review, partner rotation, and mandatory concurring partners during the late 1970s after Senator Lee Metcalf (D, Montana) and Representative John Moss (D, California) criticized the accounting profession and proposed more stringent reforms.

Discussion Questions

1. What factors led to the dissolution of the APB?
2. How is membership structure of the FASB different from the CAP and the APB?
3. How did Watergate and the Arab oil embargo create pressure for accounting reform?
4. What recommendations did Senator Lee Metcalf and Representative John Moss make for reforming the accounting profession?
5. What recommendations did the (Cohen) Commission on Auditors’ Responsibilities make for reforming the public accounting profession?
6. What reforms did the AICPA adopt in response to the Moss/Metcalf congressional hearings?
7. According to SAS No. 3, what risks are posed by computerized accounting systems?

Additional Resources

The Commission on Auditors’ Responsibilities (aka Cohen Committee): Report, Conclusions, and Recommendations, 1978.