RESPONSE by Charles A. Bowsher

I very much appreciate the honor of being elected to the Accounting Hall of Fame. When I read the names of outstanding individuals who have previously been elected, I feel very privileged to join such a famous group of leaders who have contributed so much to our nation and to the accounting profession.

Shortly after I began my freshman year in 1949 at the University of Illinois, I decided to major in accounting. One of the reasons that I and many others chose accounting as our major was the able and exciting trio of teaching assistants—Lou Matusiak, Jim Wade and Art Wyatt. Later, I was to have Professor Mautz and many other outstanding professors as teachers at the University of Illinois.

I also owe a big debt of gratitude to the University of Chicago Graduate School of Business where I received an M.B.A. in 1956 after completing my Army service.

I joined the Chicago office of Arthur Andersen and Co. 40 years ago, in the summer of 1956. It was the most exciting place that any young accountant could begin his career. Leonard Spacek was the leader and we worked very hard to successfully complete each audit and special assignment that was presented to us. After 2 years on the audit staff, I transferred to the systems staff. This was the unit that eventually became Andersen Consulting.

In 1967, I left the firm for a 4year period to serve as Assistant Secretary of the Navy for Financial Management under Presidents Johnson and Nixon. Dr. Robert Anthony, a member of the Hall of Fame, was the Comptroller of the Defense Department when I first arrived at the Pentagon.

In 1971, I returned to Arthur Andersen and Co. and assumed the newlycreated responsibility for the government services work on a firmwide basis. In 1975, Harvey Kapnick, the managing partner of the firm, suggested we prepare a set of financial statements for the federal government as a research project. I headed this effort, and worked closely with the then Comptroller General, Elmer B. Staats, another member of the Hall of Fame.

Later in 1975, we were selected by the Secretary of the Treasury to represent him and the federal government in doing a financial review of New York City. It was that work that disproved what many in government claimed—that government units were too big and unique to have annual financial audits.

It was also at that time that I became instrumental in Arthur Andersen’s efforts to encourage public discussion on the need for sound financial reporting within the public sector. In a 1979 speech, I said that if we are to restore public confidence in the financial affairs of government, several things are necessary. First, we must have adequate accounting standards for the public sector; second, we need adequate financial management systems in the public sector; third, we need sound financial reporting; and finally, we need annual financial audits like those in the private sector.

In 1981, President Reagan selected me to be the sixth Comptroller General and the leader of the General Accounting Office. Improving the financial management of the government at all levels has been one of my priorities since taking office.

In the early 1980s, we did not make much progress at the federal level because of opposition from the Office of Management and Budget (OMB). We did make significant progress with state and local governments. Building on Elmer’s earlier audit work, we were successful in having Congress pass the Single Audit Act of 1984, which mandated annual financial audits of all states and most cities of any size. GAO also played an important role in establishing the Governmental Accounting Standards Board (GASB) in 1984. Today, all major public entities at the state and local levels in the United States have an independent audit.

In 1990, the Congress passed the Chief Financial Officers Act. The Act established within the Office of Management and Budget a Chief Financial officer (CFO) for the federal government and created CFOs within major federal departments and agencies. The 24 largest federal agencies (comprising 95 percent of assets, revenues and costs) are required to have auditable financial statements for fiscal year 1996 and each year thereafter. A consolidated annual financial report will be audited and issued beginning with fiscal year 1997.
In 1933, Colonel Carter was able to persuade the Congress with one testimony to enact the basic legislation that required annual independent audits for all public corporations. It has taken me most of my 15year term, many audits of the Internal Revenue Service, the Air Force, the Customs Service and other agencies, and well over 20 testimonies before Congressional committees to achieve similar legislation for the public sector. I can only conclude that Colonel Carter was a more persuasive individual.

However, we now have a good legislative basis requiring annual audits at all levels of government in the United States. We still have much work to do to improve the systems, to make the annual financial reports more readable and useful, and to improve the standards. If we can make good progress in the United States in the next decade, I am confident we can have great impact throughout the rest of the world on improving financial reporting in the public sector.

In closing, I would like to pay tribute to my wonderful wife, the former Mary C. Mahoney, who was willing to marry me some 33 years ago. She has been very supportive of my career moves going back and forth between the private and public sectors, even though some of those moves meant a smaller paycheck. She has been a terrific mother to our two children, both M.B.A. graduates of Stanford University, which is most appropriate since my fellow inductee today is Professor William Beaver of Stanford University. I would like to add my congratulations to both Bill and Don Kirk who were also honored by their election to the Accounting Hall of Fame this year.

You have honored me with this election to the Accounting Hall of Fame. I am grateful and I thank you.