Abstract This article comments on developments in the accounting sector in the U.S. as of September 1987. A number of well-publicized sudden business failures and incidents of fraudulent financial reporting have focused public attention on the corporate financial reporting process. This has led to identification of what has come to be called the expectation gap, which means the differences between what the public believes corporate management's and independent auditors' responsibilities are or should be in the system of corporate financial reporting and what professional standards now require. Moreover, the National Commission on Fraudulent Financial Reporting was established in June 1985 in response to increasing allegations of fraud in financial reporting and a record number of U.S. Securities and Exchange Commission enforcement actions in recent years. The Treadway Commission is a joint effort funded by the American Institute of Certified Public Accountants, the American Accounting Association, the Financial Executives Institute, the Institute of Internal Auditors and the National Association of Accountants. On the other hand, the recommendations directed toward the public company are based on the conclusion that each public company is ultimately responsible for preventing and detecting fraudulent financial reporting.
Hill et al. (Tue,) studied this question.