ABSTRACT
During the 1980s, financial reporting norms came under stress as (1) industry regulators increasingly viewed them as a means of achieving “public interest” goals like those mentioned above for banks and thrifts, and (2) companies and trade associations ratcheted up their lobbying of the FASB for preparer-friendly standards. A reinvigorated merger movement, coupled with the onset of pervasive restructurings, placed increased revenue and earnings pressure on CEOs, whether as engineers of attempted takeovers or as defenders against such takeovers. To the audit firms, the merger movement also portended a loss of clients, as only one of the audit firms of two merger partners would be appointed the auditor of the merged entity.14 It was also a decade marked by an increased emphasis on analysts’ earnings forecasts, adding to the pressure on CEOs to achieve earnings targets. Stevens (1985, 224) found evidence of this latter strain of earnings pressure on management as early as the mid-1980s, with the consequent insistence that the company’s accountants manage the earnings to meet the forecast: “Do whatever the hell you have to do and do it quickly and discreetly” (paraphrased by Stevens).
