International Convergence of Accounting Standards—A Brief History

International convergence of accounting standards is not a new idea. The concept of convergence first arose in the late 1950s in response to post World War II economic integration and related increases in cross-border capital flows. Initial efforts focused on harmonization—reducing differences among the accounting principles used in the world’s major capital markets. By the 1990s, the idea of harmonizing accounting standards was replaced by the concept of convergence—the development of a single set of high-quality, international accounting standards that would be used in at least all major capital markets. (Refer to the FASB website for a chronology of some of the key events in the evolution of the international convergence of accounting standards.)

History of the AICPA

The American Institute of Certified Public Accountants (AICPA) and its predecessors have a history dating back to 1887, when the American Association of Public Accountants (AAPA) was formed. In 1916, the American Association was succeeded by the Institute of Public Accountants, when there was a membership of 1,150. The name was changed to the American Institute of Accountants in 1917 and remained so until 1957, when it changed to its current name of the American Institute of Certified Public Accountants. The American Society of Certified Public Accountants was formed in 1921 and acted as a federation of state societies. The Society was merged into the Institute in 1936 and, at that time, the Institute agreed to restrict its future members to CPAs. (Read more about the AICPA digital archives in the August 2007 Journal of Accountancy article "A Treasure Trove of Accountancy’s Past".)

Professional Judgment and the Auditor (1995)

The 1995 CICA Research Report Professional Judgment and the Auditor discusses the nature and practice of professional judgment in auditing. The Report considers professional judgment in the context of a financial statement audit but, because judgment must be applied in any type of engagement an auditor undertakes, the findings may be equally applicable to other assurance engagements. The Report focuses on concepts and principles of professional judgment rather than prescriptive rules because rules, by their very nature, cannot state the most that is expected of an auditor but simply the least. Rules can only define a minimum level of acceptable professional conduct; they can neither pre-empt nor usurp auditor judgment.

Professional Judgment in Financial Reporting (1988)

The 1988 CICA research study Professional Judgment in Financial Reporting examines the nature and practice of professional judgment on accounting measurement, presentation and disclosure issues. The focus is on the responsibilities of both preparers and auditors. Such professional judgment is shown to be, at its best, a systematic and analytical process of reaching objective conclusions about issues that may be difficult and complex. Impediments to quality in this process are identified and recommendations are directed to removing or reducing such impediments. The close relationship between professional judgment and professional standards is given particular attention, as are such aspects of professionalism as integrity, knowledge and consultation. The study analyzes practices and standards in Canada, the US, UK and International accounting standards. Most recommendations will be relevant to standard-setters, professional accountants and others in all countries.