Leaders of the American Institute of CPAs and the Center for Audit Quality told legilators that bankers should not regulate accounting.
The accounting and auditing organizations are worried about proposed legislation setting up a systemic risk regulator for the financial sector. The legislation proposes creation of an oversight council that would have the ability to change accounting standards in the event of a crisis—replacing the FASB as SEC’s acconting standard-setter.
The Centre for Audit Quality states that standards are for the benefit of investors so that they can get the information that they need so that they can make valid investment decisions, and that the SEC acts as an investor advocate and is the right oversight party for helping the FASB maintain independent standard setting. Having financial and banking regulators be part of that process with veto power over accounting and auditing standards is not a good model. Particularly in this time of financial crisis, it is a bit ironic that we would be talking about watering down the process that’s designed to protect investors.”
AICPA president and CEO Barry Melancon noted that banking regulators already have the ability to adjust capital requirements and the SEC can suspend accounting rules when needed, as the SEC has the ability to suspend accounting rules, even without a crisis situation. Accountants fear a circumvention of the rule of due process in the accounting standard-setting process.
The legislation would go against SEC chair Mary Schapiro’s recent warning against interfering with the independence of the accounting standard-setting process, which seh referred to as “race for the bottom”.