the American Institute of Certified Public Accountants (AICPA) is the first major step in the process by which the “Big Eight” firms are able to control the establishment of accounting standards used by their corporate clients. The AICPA is the largest professional association of CPAs and the most important private group affecting the practice of accounting. It dominates all significant aspects of accounting because the accounting profession is largely self-regulated, and Federal and State authorities have recog- nized policies and procedures established by the AICPA as repre- senting decisions by the accounting profession. Chapters II, III and IV of this study describe the AICPA and its activities.
The AICPA is organized in a manner which permits the parties controlling its power structure to maintain their control over the orga- nization. The “Big Eight” firms effectively control the power struc- ture, and use the AICPA to advance their collective interests. The AICPA’s power structure is comprised of its council, its board of di- rectors, its president and administrative staff, and its important committees which establish AICPA policies and procedures.
The AICPA’s board of directors has broad authority to set policies and manage its resources. In fiscal 1976, six of the 18 board members, including the immediate past chairman of the board and the desig- nated next board chairman, represented “Big Eight” firms. Nine of the 18 board members were from the 15 largest accounting firms.
The real work of the AICPA in terms of performing certain tasks and accomplishing specific goals is handled almost exclusively by its committee structure. The 108 committees listed and described in the 1975-76 AICPA Committee Handbook cover every topic of interest to the accounting profession. While the influence of the “Big Eight” firms pervades the AICPA committee structure, their representation is concentrated on committees performing work in substantive areas that have an extensive impact on the actual practice of accounting, and frequently affect governmental policies. “Big Eight” repre- sentation exceeded 50 percent on several of the most important com- mittees in fiscal 1976.
The AICPA bylaws provide that the five most important commit- tees — called senior technical committees — shall speak for the AICPA in their respective areas without consulting either the council or the board of directors. Because Federal agencies and State boards of ac- countancy charged with regulating accountants have chosen to rely upon the AICPA to such a great extent, the pronouncements of senior technical committees have become the prescribed standard followed by CPAs in several substantive areas. The public and the accounting profession are profoundly influenced by the activities of senior tech- nical committees, but these autonomous committees have no proce- dural guarantees to protect the interests of those not actually represented on the committees.
The “Big Eight” firms dominate all five senior technical commit- tees. Through these committees, they are able to determine the AICPA’s policies and direct its activities on such important matters as accounting standards, auditing standards, management advisory services, Federal taxation, and professional ethics. The senior tech- nical committees theoretically speak for the entire membership of the AICPA in those five areas of vital interest to CPAs and the public.
The Auditing Standards Executive Committee, one of the senior technical committees, performs an especially important function. It develops the AICPA’s positions on proper auditing procedures which are issued as Statements on Auditing Standards.
The process by which the Auditing Standards Executive Commit- tee sets auditing standards on behalf of the AICPA is more direct and tightly controlled. Auditing standards equal accounting standards in importance because they govern the procedures used by accountants to check the accuracy and reliability of business records supporting financial statements. The legal liability of accountants in cases involv- ing fraud or other illegal activities by corporate managements is often determined by their compliance with recognized auditing standards.