prescribed standards of the time. The New York Stock Exchange also had a strong influence in making standards for listed securities on the stock market in the early 1930’s. The new standard demanded that all corporations applying for a security listing had to include a financial statement report issued yearly. In addition, the annual report must be audited by an independent public accountant and accompanied by certification that the accounts that are in good standing order. In July of 1933, additional requirements were established that an independent public accountant would audit and certify the balance sheet, income statement, and surplus statement for the most recent year fiscal year. Also, the agreement stated that an annual report to stockholders would be audited and accompanied by a similar certificate (Staub, 1942). In contrast, the railroads were not required to follow the new practices. This was based on the false belief that the Interstate Commerce Commission was responsible to periodically audit the railroads financial statements. In 1930’s, the Securities and Exchange Commission had rigorous control of public utility holding companies and this would result in a very important accounting provision. The Public Utility Act of 1935 specified the prevention of the payment of dividends out of capital or unearned surplus without the approval of the Commission. This was a very significant movement that made the distinction of earned and unearned surplus in statutory law, which was previously only mentioned, in accounting practice and few corporate laws. Having this in statuary law would establish a clear definition and understanding of the subject that would be very helpful to the accountant. Further amendments to the Federal Power Act in 1935 gave more power to the Federal Power Commission to determine and fix the proper rates of depreciation and classify depreciable property into specific classes. The Trust Indentured...
