An Investigation of the Distribution of Power in the APB and FASB

The method of self-regulation exercised by the accounting profession has been increasingly criticized in recent years with one of the most direct assaults contained in the Metcalf Staff Report, The Accounting Establishment: A Staff Study [1976]. There it is implied that effective control over policy making boards is held by several large accounting firms (the Big Eight). This power is claimed to derive from the disproportionate representation on the Accounting Principles Board (APB) and the Financial Accounting Standards Board (FASB) maintained by the Big Eight, along with alleged control over board funding, staffing of research support groups, and representation on the overseeing Financial Accounting Foundation. Although no evidence of actual manipulation is presented, the subcommittee staff attempts to make a convincing case against the accounting establishment based on potential usurpations of the system by the Big Eight. Instigated by these and previous criticisms of private-sector policymaking in accounting, a number of changes have been made in the structure and composition of the policymaking mechanism. The accounting profession has become much more sensitive to its public image, desiring at least to convey the appearance that the standard-setting process is equitable to all interested constituencies. Thus, although bloc voting has not yet been documented (e.g., see Brown [1981]), it is still considered desirable to reduce any ostensible control by a single group such as the Big Eight. Accountants therefore should be concerned about