The Influence of the U.S. Securities and Exchange Commission Upon the Practice of Auditing.

Abstract The article focuses on the influence of the U.S. Securities and Exchange Commission (SEC) upon the practice of auditing. The study has been confined to an examination of the liability provisions contained in the Federal Securities Acts of 1933 and 1934, the effect of governmental regulation on the accounting profession based on those acts; and an evaluation of the Commission's influence on auditing procedures, standards, certificates, and the personal conduct of accountants. The liability provisions included in the two acts were found to have been designed as precautionary measures and were not the result of auditing practices prior to 1933. Auditing standards appeared necessary to regain public confidence through the assurance that examinations by public accountants were up to a specified level of performance. Auditing standards prior to their requirement by the SEC were on an individual basis, and the need for a profession-wide adoption was apparent. A special committee appointed by the American Institute of Accountants proposed a set of standards, which was subsequently adopted. Early decisions of the Commission regarding audit certificates indicate the prevalence of faulty certificates accompanying SEC registrations.