Sec and Ponzi Scheme

There is currently an ongoing struggle in the United States concerning independent accounting standard setting. Since the crash of the stock market in 1929, the procedures for accounting standard setting have come from the private sector. The Securities and Exchange Commission has been in direct agreement with the process and has fully embraced it. Traditionally, Congress has supported keeping standard setting independent, but there has been a recent uprising of opposition within Congress against the practice of independent standard setting. Congress has recently pushed for standard setting to be placed under governmental control. This swift call for action is based on the current economic downturn and the SEC’s handling of the Bernie Madoff investigation.

The stock market crash of 1929 resulted in the most devastating economic downfall in US history. It came as no surprise that after an extensive investigation into the cause of the economic catastrophe, a lack of sufficient accounting standards was determined to be the primary cause. In response to these findings, the Securities and Exchange Commission(SEC) was created to “restore investor confidence in capital markets by providing investors and markets with more reliable information and clear rules of honest dealing”(Investor’s, 2003). In order to accomplish the objective and ultimately restore economic prosperity and investor confidence, the SEC sought aid from independent private organizations in 1938 (Walter, 2009). This private sector was instrumental in helping the SEC to resolve issues involving accounting standard setting. These standards are the foundation for financial reporting, in investor decision-making, and confidence in the economy as a whole. The standards implemented by the private sector helped rescue the economy from the most extreme economic depression in US history and remain in place today. Currently, independent standard setting is controlled by the Financial Accounting...