AICPA Vice Chair Calls For Reducing Complexity, Increasing Transparency
December 12, 2006
In his opening remarks at the American Institute of Certified Public Accountants (AICPA) National Conference on Current Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) Developments on December 11, AICPA Vice Chair Randy Fletchall (of Ernst & Young) spoke about the need to both reduce complexity and increase transparency.
“Can transparency of the information communicated to investors be enhanced while at the same time reducing complexity?” Fletchall asked. “Can we improve the financial reporting process by reducing rules and regulations, rather than increasing them? Can reliance on professional judgment be done with a principles-based system that is rigorous enough to serve the public interest?”
He responded, “Yes we can,” adding, “One could take the view that a transparent system is one that discloses more and more detail, thereby adding to the regulations and standards that are required to accurately and transparently report them. But a complex system is not a transparent system. On the contrary. Complexity discourages transparency.”
Fletchall noted FEI President Colleen Cunningham and SEC Chief Accountant Conrad Hewitt having recently reiterated the need to address complexity - [at the December 8 meeting of FASB’s Financial Accounting Standards Advisory Council or FASAC] - as well as earlier calls from Financial Accounting Standards Board (FASB) Chairman Robert Herz and SEC Chairman Christopher Cox, and AICPA’s support.
Fletchall said emphasis should be placed in four areas:
- principles-based standards
- international harmonization
- enhanced business reporting
Fletchall’s complete remarks are available here.
Prepared Dec. 12, 2006 by Edith Orenstein eorenstein@FinancialExecutives.org, Director, Technical Policy Analysis, Financial Executives International (FEI). This summary does not represent FEI opinion unless specifically noted above.