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The future of accounting and disclosure in an evolving world: The need for dramatic change

Wallman, Steven M H.  ; Sarasota Vol. 9, Iss. 3,  (Sep 1995): 81.

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For the past 60 years, the Securities and Exchange Commission (SEC) has relied heavily on the accounting profession. The profession has helped the SEC satisfy its statutory responsibility to adopt accounting standards(1) for public companies and to promulgate auditing standards that ensure our markets receive the highest quality financial information. In addition, the SEC relies on accountants to ensue that public companies (i) record transactions accurately and fairly(2) and (ii) devise a system of internal controls that maintains accountability for assets and permits preparation of financial statements that present fairly the company's financial position and results of operations.(3)

Accountants are the gatekeepers of our financial markets. Without accountants to ensure the quality and integrity of financial information, the markets for capital would be far less efficient, the cost of capital would be far higher, and our standard of living would be lower. The accounting profession has undertaken a function that promises society a number of benefits, including lower investment risk and better resource allocation. In turn, accountants have been granted a legally enforceable franchise-no company can come to the public markets without an accountants' attestation. With real appreciation, I recognize the important role accountants play in our society.


The primary focus of my remarks today relate to the future of accounting and disclosure in an evolving world--and the need for dramatic change. However, before I turn to the future I would like to reflect a little on the recent past. In particular, I would like to address the issue of stock option accounting and the role of the FASB in the recent stock option accounting debate.(4)

I understand the arguments made for and against a charge to income for stock option compensation and, alternatively, disclosure of stock option compensation. While reasonable people can...