SEC exerts more power over FASB
I caught two articles recently that we as a CPA profession need to keep a careful watch over.
MACPA member Jack Ciesielski, author of the nationally recognized publication, the The Analyst's Accounting Observer, authored a great blog post titled, A Camel's Nose Under the Tent: Sure Looks a Lot Like the SEC, in which he raises some good questions about the SEC apparently exerting significant influence over FASB. A recent article in CFO Magazine talks about how the SEC approves FASB's budget and outlines similar concerns.
Both of these articles provide vivid examples of how the regulators have taken significant roles in standard-setting over the CPA profession and financial accounting. Whether you agree with this pendulum shift or not, my point is that it is a major change and one that needs to be watched.
I have been trying to raise the awareness of these changes through articles, courses and our ever-popular town hall series on professional issues. I also cover this in our Leadership Academy for new / young professionals. I believe CPAs continue to have a significant role in the public interest of our capital markets and our whole system of free markets and must keep up with the changing regulatory environment.
Many CPAs are not aware of the significant changes that have occurred in how the profession is regulated since the passage of the landmark Sarbanes-Oxley Act of 2002. Two major changes happened in that law: (1) the move of auditing and performance standards from the AICPA to the newly formed PCAOB (Public Company Accounting Oversight Board); and (2) moving the funding of FASB through the FAF (Financial Accounting Foundation) to the PCAOB / SEC. Increased public company registration fees paid to the SEC are now used to fund the FAF, which in turn funds FASB.
The chart on the left was drawn by MACPA staffer Carol Kirwan and is used in our training programs and town hall meetings.
So what does this all mean to the average CPA? Lots! It means government regulators have much more control over financial accounting standards (and auditing standards for public companies) and as they exert influence and establish public policy, those forces will directly impact the standards used by all CPAs, even those in the private company and not-for-profit areas.
What do you think? Is this a good thing, or is the SEC exerting too much influence?