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The CPA Journal's interview of Dan Guy (May 1998 issue) included a comment which may be worthy of some follow-up. Prefacing a question regarding movement toward international auditing standards, The Journal observed that "[W]hen KPMG gives its report on Daimler Benz, the source and nationality of the auditing standards are not an issue."

We assume that this was a favorable comment along the lines that, if a Big Six firm conducts an audit, high quality is taken for granted. We agree with this presumption of quality; however, we also believe that financial statement users are nevertheless interested in knowing the source and nationality of both the audit and accounting standards applied to a set of financials. Why? Because global capital markets have resulted in applications of standards that the casual observer might not expect.

Daimler Benz, ironically, offers an excellent example. Most of us would probably expect that German standards would be applied. Some might expect to find international standards. Neither of these presumptions would turn out to be accurate.

KPMG's report on Daimler's 1996 financials reveals that "[W]e conducted our audits in accordance with generally accepted auditing standards in Germany and the United States." Furthermore, the financial statements present fairly "in conformity with United States generally accepted accounting principles."

If the Daimler-Chrysler merger takes place, should we expect German standards? United States standards? International standards? We suggest that identification of the source of standards is important information for those who assess the relevance and reliability of financial statements.*

John P. McAllister, CPA, PhD

Chair & Professor of Accounting

Kennesaw State University

John D. Gould, CPA

Retired Partner, Ernst & Young

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