| Sledgehammer
accounting
The report on the accounting profession just released by the subcommittee headed by Senator Lee Metcalf (D-Mont.) is incompetently researched and grossly biased. Metcalf and his staff have tried to solve a complex problem by pounding it with a sledgehammer, and the result is pure junk. Unfortunately some people--including some congressmen--will take the report seriously. If they succeed in writing its recommendations into law, they will strap U.S. business and U. S. securities markets into a meaningless, stultifying straitjacket of government-dictated accounting rules. The report (page 76) begins with the unproven, simplistic charge that the eight biggest accounting firms have a stranglehold on the profession and obligingly twist accounting principles to suit their corporate clients. Metcalf then takes a potshot at the Securities and Exchange Commission for failing to dictate accounting rules. He recommends breaking the power of Big Eight firms and transferring the rule-making to a government agency or perhaps to Congress.
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This is
nonsense.
Government rule-making would expose accounting to political
pressures--as
it did some years ago when Congress yielded to pressure and specified
how
the investment tax credit was to be taken into income, thus making a
relatively
small changes in the tax look like an important switch in economic
policy.
What is worse, government rule-making would saddle business with
arbitrary,
inflexible procedures that would take much of the meaning and useful
information
out of corporate reports.
Because accounting is a complex, technical subject that continually changes, the rules ought to be made by the most talented practitioners who are immersed in the realities of the economic world. Such people are not found in the government, and even if Congress were prepared to match the $125,000-a-year salaries of the Financial Accounting Standards Board, few top-flight accountants would be willing to work in a political atmosphere. Effective accounting
standards can
be developed only by skilled, independent professionals. There is
no place in the system for the heavy hand of the well-intentioned but
politically
minded, inexpert bureaucrat.
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