Rethinking the Structure of Accounting and Auditing

32 Pages Posted: 13 Jun 2003

See all articles by Shyam Sunder

Shyam Sunder

Yale University - School of Management; Yale University - Cowles Foundation

Multiple version iconThere are 2 versions of this paper

Date Written: May 2003


Failures in corporate governance of many major US corporations in 2002 suggest that it may be useful to fundamentally rethink the structure of institutions of accounting, auditing, corporate governance and executive compensation. Replacement of the system of authoritative standards by a competitive, common law approach to accounting principles and rules may help shift the focus of financial reporting from form to substance. Following some key Supreme Court rulings, the quality of auditing declined under the governmental push to increase competition in that industry beginning with the late seventies, pushing audit firms to peddle consulting services to their clients for economic survival. Restoring the high quality of audit may require radical reorganization of the audit function, such as bundling it with insurance. The protection of minority interest by the board of directors and the control of runaway executive compensation are two other problems whose solution may require structural, not just procedural, changes.

Keywords: Accounting, Auditing, Regulation, Institutional Reform

JEL Classification: G28, L44, L51, L84, M41

Suggested Citation

Sunder, Shyam, Rethinking the Structure of Accounting and Auditing (May 2003). Available at SSRN:

Shyam Sunder (Contact Author)

Yale University - School of Management ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6160 (Phone)


Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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