In addition there would be no regulation of the qualifications for or composition of a board of directors, though we should anticipate the use of a board as the most efficient device for dealing with management succession problems. The free-market model comprehends an unregulated system for buying and selling all securities and a completely unfettered market for private information. Only by starting analysis with this picture can one properly appraise or evaluate changes that have occurred over the years as well as well as propose useful modifications.

Much of recent academic writing in corporate and financial policy has been removed from the realities of either the business world or the marketplace and as a result often proposes self-defeating or harmful 'solutions.' Scholarly work in this area should always begin analysis with recognition of the principal aspects of a completely free and unregulated corporate system, the model for which seems to be less and less familiar to modern writers. The third purpose of these comments is to stimulate further debate and empirical research aimed at enhancing the future quality and integrity of the financial reporting process. I then propose changes in accounting, auditing, and governance that I believe will address the current problems with the underlying quality and integrity of the financial reporting process. First I review the historical development of accounting, auditing, and corporate governance in an effort to identify and understand salient features of the past that have led to the current state of affairs. The purpose of this commentary is threefold. The academic accounting community can play a role in stimulating change aimed at enhancing market efficiency through commentary and scientific-based research that provide direction for change. However, recent accounting failures have pointed out the need for substantive improvements in these components. Accounting, auditing, and the structure of corporate governance that they operate within are essential components in the flow of information to capital market participants.

To achieve orderly capital markets around the world, corporations must provide investors and creditors with relevant, reliable, and timely information.

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