Committee on Accounting Procedure

Committee on Accounting Procedure

The Committee on Accounting Procedure was a standard-setting committee established by the American Institute of Certified Public Accountants in 1939 to issue authoritative guidance on accounting measurement and disclosure. It operated amid debates involving the Securities and Exchange Commission, the Financial Accounting Standards Board, the Committee on Governmental Accounting, and influential accounting firms such as Price Waterhouse, Arthur Andersen, and Deloitte. The committee attempted to reconcile practice advocated by leaders at Columbia University, Harvard Business School, and the University of Chicago with regulatory expectations arising from the Securities Act of 1933 and the Securities Exchange Act of 1934.

History

The origin of the committee followed criticisms from the American Institute of Accountants and efforts by accounting scholars including William A. Paton, H. V. Poor, and George O. May. Following high-profile corporate scandals like Enron (postdating the committee) and earlier failures scrutinized by Public Works Administration investigations, the committee sought to provide stability similar to initiatives by the Federal Reserve System and the Securities and Exchange Commission. During World War II, liaison with the Department of Treasury and the War Production Board influenced pronouncements; postwar reconstruction concerns paralleled discussions at the Bretton Woods Conference and financial debates involving John Maynard Keynes advocates at Cambridge University and LSE affiliates. By 1959 the committee's role was superseded by the Accounting Principles Board under the AICPA, reflecting shifts echoed in debates at Columbia Law School and policy circles around the U.S. Congress.

Membership and Organization

Membership combined practitioners, academics, and representatives of accounting firms: notable figures included Francis M. Wheat, George H. Boote, and Russell L. Ackoff-era contemporaries from Wharton School and Stanford Graduate School of Business adjuncts. The committee drew members from firms like Ernst & Young, KPMG, and Price Waterhouse Coopers as well as professors from Columbia Business School, Harvard University, and University of Pennsylvania. Organizationally, the committee reported to the American Institute of Certified Public Accountants' Council and coordinated with the Securities and Exchange Commission staff, the Federal Trade Commission, and the Internal Revenue Service on taxation interplay. Subcommittees addressed topics overlapping with institutions such as International Accounting Standards Committee precursors and committees at Institute of Chartered Accountants in England and Wales.

Pronouncements and Accounting Research Bulletins

The committee issued a series of Accounting Research Bulletins that addressed valuation, revenue recognition, inventory, depreciation, and consolidation—topics debated at New York University seminars and in journals like the Journal of Accountancy and Accounting Review. Notable ARBs tackled inventory methods favored by practitioners at General Electric and Ford Motor Company and revenue guidance relevant to conglomerates such as General Motors. ARBs interacted with litigation before courts including the United States Court of Appeals and influenced tax controversy positions before the Tax Court of the United States. Later, the committee's pronouncements were evaluated against principles advanced by scholars at Yale University, Princeton University, and the University of Chicago Law School.

Influence and Legacy

The committee shaped mid-twentieth-century accounting practice in ways paralleled by the later Financial Accounting Standards Board and the Accounting Standards Board in the United Kingdom. Its ARBs provided precedent cited by practitioners at CohnReznick and regulators at the Securities and Exchange Commission. Academics from Columbia University and Harvard Business School debated the committee's conceptual underpinnings in symposia with participation from figures affiliated with Moore School of Electrical Engineering and policy analysts from the Brookings Institution. The transition to the Accounting Principles Board and eventually the Financial Accounting Foundation and Financial Accounting Standards Board reflected institutional evolution first shaped during the committee's tenure.

Criticism and Controversies

Critics including scholars at University of Chicago and practitioners associated with Arthur Andersen argued the committee's case-by-case ARB approach lacked a coherent conceptual framework, a critique echoed in hearings before U.S. Congress committees and commentary in the Harvard Law Review. Debate involved prominent voices from American Accounting Association conferences and legal challenges referencing standards in decisions by the U.S. Court of Appeals for the Second Circuit. Controversies also arose over perceived influence by large firms such as Price Waterhouse, Ernst & Young, and Deloitte and tensions with regulatory bodies like the Securities and Exchange Commission and the Internal Revenue Service, prompting reforms that led to successor organizations.

Category:Accounting bodies Category:American Institute of Certified Public Accountants