The American Institute of Certified Public Accountants (AICPA): A Decade of Challenge and Change
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Code : GOV0022
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Region : USA |
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AICPA: Inception and Scope of Operations AICPA’s history dates back to 1887 when theAmericanAssociation of PublicAccountants (AAPA) was formed inNew York City by an elite circle of chartered accountants andAmerican practitioners who admired the professional traditions of their British colleagues.AAPAdecided to establish a ‘college of accounts’ to grant degrees thatwould eventually serve as a prerequiste to control entry into the newprofession. In 1916,AAPAwas renamed as the Institute of PublicAccountantswith amembership of 1,150.The namewas changed to theAmerican Institute ofAccountants in 1917.Meanwhile, theAmerican Society of Certified PublicAccountants (ASCPA) was formed in 1921 and it started acting as a Federation of State Societies. TheASCPAwasmerged with theAmerican Institute ofAccountants in 1936 and, at that time, it agreed to restrict its future membership to CPAs6 only... America Inc.: Saddled with Accounting Scandals Traditionally, auditing industry inAmerica has been solely responsible for auditing company accounts,which were then to be perused by shareholders for assessing the financial state of their investments. Till the late 1930s, auditing was voluntary.After the SecuritiesAct of 1934, auditingwasmademandatory.After the stockmarket boomin the late 1990s and with stocks becomingmost profitable investment choice, companies began to strive tomeet analysts’ estimates to attract investors. Companies also started employing fraudulent accounting practices and stock buybacks to inflate their share prices, which artificially inflated stock prices. Research analysts working for investment banks evaluated the stock and recommended either ‘buy’ or ‘sell’ decisions to the shareholders. Eventually, the opinions of these analysts became so important that they could incease or decrease the share prices of various companies. This in turn led to increased compensation being paid by corporates to the analysts who would present a positive picture of a company to the public... |
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AICPA: The Resurgence BarryMelancon spent three years, from2002 to 2005, reshapingAICPA’smain representative body, after its regulatory function was stripped away by the US Congress due to accounting scandals. AICPA stated that it would propose a new auditing standard in early 2003 for detecting fraud. It planned to issue guidance for company management in internal control procedures and audit committees, as well as revised auditor standards on the reviewof quarterly financial statements. It also planned tomake recommendations to theSECon disclosing special purpose entities, complex financial statements...
