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Congress Is Encouraged to Keep FASB Within SEC's Purview

The Center for Audit Quality, the U.S. Chamber of Commerce and the Council of Institutional Investors sent a joint letter encouraging Congress to retain SEC oversight of FASB.

November 2009
by Journal of Accountancy Staff

A group of key stakeholders in U.S. capital market regulations sent a joint letter (PDF) to the leaders of the House Financial Services Committee to discourage possible proposals that would realign the oversight of FASB within the structure of systemic risk regulation. The letter said the SEC should remain “the primary agency with oversight over accounting standard setting.”

The letter was signed by Cindy Fornelli, executive director of the Center for Audit Quality; Tom Quaadman, executive director for reporting policy and investor opportunity at the U.S. Chamber of Commerce Center for Capital Markets Competitiveness; and Jeff Mahoney, general counsel for the Council of Institutional Investors.

The letter argues that removing FASB from the SEC’s purview would affect the independence of accounting standard setting and that “the SEC has been and continues to be best suited to provide the oversight of the FASB for such a broad and diverse economy.”

It said that for investors, businesses and other users to maintain confidence in the standards underlying financial statements “the process by which accounting standards are developed must be free — both in fact and appearance — of outside influences that inappropriately benefit any particular participant or group of participants in the financial reporting system to the detriment of investors, businesses and capital markets.” It said a realignment of oversight of FASB “within the structure of systemic risk regulation could have adverse impacts on investor confidence, which is of critical importance to the successful operation of the U.S. capital markets.”

The letter also noted that the realignment would place oversight of FASB in the hands of an “entity whose primary focus is not to serve the interests of investors and the capital markets.” This “runs the risk of impeding the FASB’s ability to promulgate and issue standards for financial reporting that faithfully represent the economic activity of business transactions and provide information that meets the needs of investors and companies for all sectors of the economy.”