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In the Midst of Revolution: The SEC, 1973-1981

What the SEC Expects

Towards Accounting Self-Regulation

- 1970 John "Sandy" Burton

The SEC relied on the FASB to develop accounting standards, but the agency took steps to supervise the setting of those standards by issuing a number of Accounting Series Releases "requiring registrants to include new types of disclosures in their financial statements."(55) In 1972, John "Sandy" Burton was hired as the SEC's Chief Accountant. Burton would prove to be an innovative thinker with an acute understanding of the principles and problems inherent in the accounting practice. During his term, the SEC would initiate a procedure to make earnings forecasts more reliable, set the principle of differentiated disclosure which recognized the varied skill set of individual investors, and encourage the practice of more detailed disclosure by firms of unanticipated and unusual risks to better advise investors.(56)

Events such as the corporate payments scandal, and the bankruptcy of the Penn Central and several other major corporations, caused the SEC and Congress to focus on accounting and auditing practices, and called into question the conduct of large accounting and auditing firms and the SEC's existing approach to the self-regulation of the profession. The U.S. Senate held hearings in 1976 on auditor performance, and published highly critical findings in The Accounting Establishment, known as the Metcalf Report, which contained a long list of suggested reforms.(57) In 1978, the U.S. House of Representatives proposed the establishment of a federal organization to regulate accounting practice before the SEC.

In response, the AICPA proposed regulations of certified public accounting firms for SEC and private practice, with peer-review of the CPA systems of quality control every three years. The proposal also established a public oversight board of five members to review and report on the SEC practice section's activities.

The SEC advocated that the AICPA be given time to regulate the professional practice of its members. At the same time, the SEC parlayed Congressional interest in additional regulation to encourage the AICPA toward expanded self-regulation.(58) While the accounting profession continued to take an activist role in its own regulation, changes to the accounting industry were to an extent driven by the SEC's recognition that principled accounting and corporate governance issues were an essential part of promoting and providing for adequate disclosure of facts to investors. This recognition re-built the infrastructure for the growing role the SEC would play in the regulation of securities-related accounting in the years ahead.

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Footnotes:

(55) Olson, 4

(56) Seligman, 527

(57) US Congress, Subcommittee on Reports, Accounting and Management, Committee on Government Operations (1976)

(58) Olson, 7-8

Related Museum Resources

Papers

November 14, 1973: "A Neglected Dimension of Financial Reporting," Address by SEC Commissioner A.A. Sommer, Jr. to the Cleveland Treasurers Club
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
December 20, 1973: SEC statement of policy on the establishment and improvement of accounting principles and standards
image pdf (Courtesy of the Gerald R. Ford Library)
January 3, 1974: SEC release on disclosure of inventory profits reflected in income in periods of rising prices
image pdf (Courtesy of the Gerald R. Ford Library)
January 8, 1974: "The Four Musts of Financial Reporting," Address by SEC Commissioner A. A. Sommer, Jr. to the American Institute of Certified Public Accountants
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
January 17, 1974: John C. Burton, "The SEC and the Changing World of Accounting," for The Dean's Forum
document pdf (Government Records)
February 12, 1974: Remarks by John C. Burton before the Memphis Chapter of the Tennessee Society of CPAs
document pdf (Government Records)
February 28, 1974: John C. Burton, "The Need for Professional Accounting Education," for The University of Texas at Austin College of Business Administration
document pdf (Government Records)
May 9 and 10, 1974: John C. Burton "The Case for Continuation of Mandatory Independent Audits for Publicly Held Companies"
document pdf (Government Records)
May 30, 1974: "Accountants: A Flexible Standard" - Address by SEC Commissioner A.A. Sommer, Jr. to the ABA National Institute on Professional Liability
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
May 30, 1974: John C. Burton, "Financial Reporting in an Age of Inflation"
document pdf (Government Records)
August 27, 1974: John C. Burton, "The Organization of the Public Accounting Profession," for the National Society of Public Accountants 29th Annual Convention
document pdf (Government Records)
September 11, 1974: "Our Attitude Toward the Accounting Profession," Address by SEC Chairman Ray Garrett, Jr. to Arthur Andersen & Co. Annual Partners Meeting
transcript pdf (Courtesy of Harvey L. Pitt)
September 24, 1974: Letter from SEC Chairman Ray Garrett, Jr. to Newton Minow on the effects of inflation on financial statements
transcript pdf (Courtesy of the Gerald R. Ford Library)
October 25, 1974: John C. Burton and A. Clarence Sampson, "Future Needs for Auditing Research," for the University of Illinois Conference on Auditing Research
document pdf (Government Records)
November 1, 1974: John C. Burton, "Leases: An Accounting View," for the Association of Equipment Lessors
document pdf (Government Records)
January 6, 1975: "The Need for Change in Accounting Policies" - Address by SEC Chairman Ray Garrett, Jr. to the American Institute of Certified Public Accountants
transcript pdf (Courtesy of Harvey L. Pitt)
January 31, 1975: John C. Burton, "Pension Accounting and Disclosure Under the New Pension Reform Act," for the Conference on the Pension Reform Law, University of Virginia
document pdf (Government Records)
February 18, 1975: John C. Burton, "Fair Presentation: Another View," for the Emanuel Saxe Distinguished Accounting Lecture at The Baruch College of The City University of New York
document pdf (Government Records)
February 19, 1975: John C. Burton, "The Evolution of Reporting and Auditing: From Periodic to Continuous," for the Robert Morris Associates and Massachusetts Society of CPAs
document pdf (Government Records)
April 26, 1975: John C. Burton - "Payments Outside the Corporate Accountability System: A Problem for Management, Auditors and Society"
document pdf (Government Records)
June 23, 1975: John C. Burton - Speech for the California Society of CPAs
document pdf (Government Records)
August 21, 1975: SEC notice of proposed amendments to Regulation S-X to require disclosure of certain replacement cost data in notes to financial statements
transcript pdf (Courtesy of the Gerald R. Ford Library)
August 25, 1975: Letter from John Burton, SEC to L. William Seidman on proposed amendments to Regulation S-X
image pdf (Roderick Hills Papers, Courtesy of the Gerald R. Ford Library)
October 14, 1975: John C. Burton - "The Changing Face of Financial Reporting"
document pdf (Government Records)
October 28, 1975: Memorandum from John C. Burton to SEC Commissioner John R. Evans with responses to questions on Guide 61
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
October 29 and 30, 1975: John C. Burton - "Legal Problems of Bank Regulators"
document pdf (Government Records)
November 3, 1975: John C. Burton - "Credit Analysis and Credit Losses: The Role of Financial Information"
document pdf (Government Records)
November 11, 1975: John C. Burton - "Inflation and Financial Disclosures: Fallacy in Numberland," for the Institute of Internal Auditors
document pdf (Government Records)
1976: Report of the Board of Governors of the Federal Reserve System on the proposal of the Securities and Exchange Commission to amend Article 3 of Regulation S-X
image pdf (Arthur F. Burns Papers, Courtesy of the Gerald R. Ford Library)
1976: SEC release on notice of proposed amendment to Article 3 of Regulation S-X
image pdf (Arthur F. Burns Papers, Courtesy of the Gerald R. Ford Library)
January 29, 1976: John C. Burton - Address to the New York State Bar Association
document pdf (Government Records)
March 16, 1976: John C. Burton - "The Current Accounting Agenda of the SEC," for the New York Society of Security Analysts, The Junior Committee
document pdf (Government Records)
March 31, 1976: John C. Burton - "Setting Accounting Standards in the 1980s," for the Arthur Young Professionals' Roundtable at the University of Illinois
document pdf (Government Records)
April 16, 1976: Letter from SEC Chairman Roderick M. Hills to Federal Reserve Chairman Arthur F. Burns on SEC proposed amendment to Regulation S-X
transcript pdf (Arthur F. Burns Papers, Courtesy of the Gerald R. Ford Library)
May 1976: John C. Burton - "Conflicts and Compromises in Financial Reporting"
document pdf (Government Records)
August 27, 1976: Financial Accounting Foundation and Financial Accounting Standards Board Statement of Position in Accounting Series Release No. 193 before SEC
image pdf (JT Ball Collection, University of Mississippi)
September 10, 1976: Letter from SEC Chairman Roderick M. Hills to William M. Batten, New York Stock Exchange on proposal for audit committees
image pdf (Roderick Hills Papers, Courtesy of the Gerald R. Ford Library)
April 12, 1977: "The Accounting Profession and the SEC: A Partnership Under Attack," Address by SEC Commissioner John R. Evans to Cincinnati Chapter, Ohio Society of Certified Public Accountants
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
April 22, 1977: Letter from SEC Chairman Harold M. Williams to Arthur F. Burns, Federal Reserve on Regulation S-X
image pdf (Arthur F. Burns Papers, Courtesy of the Gerald R. Ford Library)
May 13, 1977: Letter from Arthur F. Burns, Federal Reserve to SEC Chairman Harold M. Williams on SEC proposal for revised financial statement requirements for banks
transcript pdf (Arthur F. Burns Papers, Courtesy of the Gerald R. Ford Library)
August 1, 1977: Letter from Arthur F. Burns, Federal Reserve to SEC Chairman Harold M. Williams on proposed revision of Article 9 of Regulation S-X
transcript pdf (Arthur F. Burns Papers, Courtesy of the Gerald R. Ford Library)
November 9, 1977: "The FASB Conceptual Framework Project: A Silent Revolution" - Address by SEC Chairman Harold M. Williams to the Seaview Symposium
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
January 4, 1978: "Professional Self-Governance: An Interim Report" - Address by SEC Chairman Harold M. Williams to AICPA
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
June 19, 1978: "The Emerging Responsibilities of the Internal Auditor" - Address by SEC Chairman Harold M. Williams to the Institute of Internal Auditors
image pdf (Government Records)
July 1, 1978: SEC Report to Congress on the Accounting Profession and the Commission's Oversight Role
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
August 22, 1978: "The Changing World of the Accountant: Where the Next Steps Should Lead" - Address by SEC Chairman Harold M. Williams to the American Accounting Association
image pdf (Government Records)
November 3, 1978: "Audit Committees - The American Experience," Address by SEC Commissioner Philip A. Loomis, Jr. to The Institute of Chartered Accountants in England and Wales
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
December 8, 1978: "Improving the Accounting Profession: A Shared Responsibility," Address by SEC Commissioner John R. Evans to 8th Annual SEC Conference, Florida Institute of Certified Public Accountants
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
January 9, 1979: "The Accounting Profession: Responses to an Environment of Change" - Address by SEC Chairman Harold M. Williams to the AICPA
image pdf (Government Records)
February 28, 1979: "The SEC, the Accounting Profession, and Self-Regulation," Address by SEC Commissioner John R. Evans as part of the Distinguished Speaker Series, Department of Accounting, University of Kentucky
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
June 18, 1979: The Internal Auditing Profession: Challenges and Opportunities - Address by SEC Chief Accountant A. Clarence Sampson to the 1979 International Conference of The Institute of Internal Auditors
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
September 18, 1979: "Auditors' Responsibilities and the Public Interest" - Address by SEC Chairman Harold M. Williams to the Texas Society of Certified Public Accountants
image pdf (Government Records)
September 25, 1979: "The Vital Role of State Boards of Accountancy," Remarks by SEC Commissioner John R. Evans to National Association of State Boards of Accountancy 72nd Annual Meeting
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
October 9, 1979: "Current Problems in Financial Reporting and Internal Controls" - Address by SEC Chairman Harold M. Williams to Financial Executives Institute 1978 International Convention
transcript pdf (Courtesy of the estate of John R. Evans)
October 12, 1979: "The Regulatory Framework for Public Accounting," Address by SEC Commissioner John R. Evans to 3rd Annual Intermountain Accounting Seminar and 1979 Update
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 19, 1979: "Current Developments Affecting Small Business and Small and Medium-Sized Accounting Firms," Remarks of SEC Commissioner Philip A. Loomis, Jr. to the Foundation for Accounting Education, New York State Society of CPAs Annual SEC Accounting Conference
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 19, 1979: "The Audit Committee and the Internal Auditor: Strengthening Corporate Accountability," Address by SEC Commissioner John R. Evans to The National Association of Corporate Directors and The Institute of Internal Auditors
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
January 3, 1980: "The 1980s: The Future of the Accounting Profession" - Address by SEC Chairman Harold M. Williams to AICPA
image pdf (Government Records)
March 13, 1980: "The Role of the SEC in Overseeing the Accounting Profession" - Paper by SEC Chairman Harold M. Williams to Nuffield College, Oxford
image pdf (Government Records)
May 14, 1980: Letter from Michael Macchiaroli, SEC Division of Market Regulation to Ronald Consiglio, Deloitte Haskins & Sells on Bateman Eichler, Hills Richards, Inc.
image pdf (Courtesy of Stuart Kaswell)
May 28, 1980: Opening Statement of the Honorable Harold M. Williams, Chairman, Securities and Exchange Commission, at the Commission's consideration of proposed rules to require a management statement on internal accounting control
transcript pdf (Courtesy of the estate of John R. Evans)
August 1980: SEC Report to Congress on the Accounting Profession and the Commission's Oversight Role - Part I (pages 1-41)
image pdf (Courtesy of the Library of Congress)
September 1980: "Delegation of Powers Between the Commission and the Self-Regulatory Organizations and Professional Organizations," Paper Submitted by SEC Commissioner John R. Evans
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
September 9, 1980: Progress Report to the SEC on an NYSE Audit Trail and other Related Developments
image pdf (All rights are owned exclusively by NYSE Euronext (copyright) 2009 NYSE Euronext. All Rights Reserved, courtesy New York Stock Exchange Archives)
September 16, 1980: "Reporting Developments at the SEC and their Impact on Annual Reports" - Remarks by A. Clarence Sampson, SEC Chief Accountant at Financial Times of London seminar
image pdf (Government Records)
November 3, 1980: "Accounting and Financial Reporting - The Challenges of the 1980s" - Address by SEC Chairman Harold M. Williams to the New York State Society of Certified Public Accountants
image pdf (Government Records)
November 24, 1980: "The SEC and the Internal Auditor" - Address by SEC Commissioner Philip A. Loomis, Jr. to the Institute of Internal Auditors and the National Association of Corporate Directors
image pdf (Government Records)
January 13, 1981: "The Accounting Provisions of the Foreign Corrupt Practices Act: An Analysis," Address by SEC Chairman Harold M. Williams to the SEC Developments Conference, AICPA
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)

Photos

1970s: John "Sandy" Burton

Oral Histories

26 March 1976 John C. Burton and Robert T. Sprouse With Stephen A. Zeff

Courtesy of the Academy of Accounting Historians, University of Mississippi

04 May 2009 Nelson Kibler With Dr. Kenneth Durr

edited transcript (pdf)

07 July 2005 A. Clarence Sampson With Ernest Ten Eyck

edited transcript (pdf)

Programs

18 September 2007

Fireside Chat - Accounting Aspects of the Foreign Corrupt Practices Act

Moderator: Theresa Gabaldon

Presenter(s): Philip Ameen, Teresa Iannaconi

edited transcript (pdf)

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