The Fox and the Ostrich: Is GAAP a Game of Winks and Nods?

58 Pages Posted: 1 Dec 2009

Date Written: November 30, 2009


The fox is frequently described as sly, cunning and calculating in world literature. It is often associated with behavior that seeks advantage through trickery and pretext. The ostrich on the other hand, has been portrayed as cowardly and irrational. Its character defect is epitomized when it sticks its head in the sand at the first sign of trouble. The Financial Accounting Standards Board (FASB) can be described as the fox; the Securities Exchange Commission (SEC), the ostrich. This article examines the creation of accounting principles by the fox and the failure to govern by the ostrich. History demonstrates that the SEC adopted a policy of relying heavily on FASB in establishing accounting standards commonly known as generally accepted accounting principles (GAAP). However, neither FASB nor any of its predecessor organizations bear a responsibility of a public trust, nor any liability in the event of a breach of that trust. The SEC’s failure to establish accounting principles and constant reliance on private standard setters has contributed to the manipulation and exploitation of GAAP by corporations and their auditors. This article challenges the SEC’s policy of relying on third party standard setters such as FASB and calls upon the SEC to stop relying on private standard setters and start taking an active role in creating accounting standards. Only then, can it be said that the SEC is no longer sticking its head in the sand.

JEL Classification: M44

Suggested Citation

Acevedo, Arthur, The Fox and the Ostrich: Is GAAP a Game of Winks and Nods? (November 30, 2009). Available at SSRN: or

Arthur Acevedo (Contact Author)

The John Marshall Law School ( email )

315 South Plymouth Court
Chicago, IL 60604
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics