SEC's Pitt: Need For Reform Of Accounting Profession

NASDAQ/Dow Jones News ^ | 11/17/02 | News Wire

[L,TOWM]

SEC's Pitt: Need For Reform Of Accounting Profession

NEW YORK -(Dow Jones)- Citing "too many accounting failures," Harvey Pitt, the Securities and Exchange Commission chairman, Thursday announced SEC's plans to set up a new regulatory body to oversee the accounting industry.

"There is a need for reform of the regulation of our accounting profession," Pitt said during a press conference, adding that "we cannot afford a system like the present one that facilitates failure rather than success."

Apart from setting up a new private-sector panel that would have full regulatory power to investigate wrongdoing by accountants, the chairman said he is exploring the option of legislative action. Pitt said the SEC is working with Congress as well as the accounting industry in exploring ways to strengthen the profession to avoid another Enron Corp. (ENE) failure.

"The potential loss of confidence in our accounting firms is a burden our capital markets cannot and should not bear," Pitt warned.

The new regulatory body will consist of "public members" that can exert " discipline" and "public control" over the accounting industry.

"This body should be empowered to perform investigations, publicize the results and restrict individuals who have performed a criminal action," Pitt said, adding that the new body should be subject to SEC oversight.

Disciplinary proceedings in case of any wrongdoing discovered by the body could fall under the country's criminal laws - or new laws could be drafted.

The chairman stressed that the new organization would be independent from the American Institute of Certified Public Accountants, or AICPA, and the individual state licensing boards, currently overseeing accountants.

(This story was originally published by Dow Jones Newswires)

Copyright (c) 2002 Dow Jones & Company, Inc. All Rights Reserved

[L,TOWM]

The '29 Crash brought us the requirement that all publicly traded companies in the US have audited financials to submit to the SEC. This article looks to be a reaction from the SEC to Audit Failure, which has been a long existing problem in the CPA profession.

So, what will it take to get the public to get behind a move to turn the audit function into a government program? Comments...?

[L,TOWM]

More enron fallout...

[L,TOWM]

Ping.

[Voltage]

We need a new law that everyone must be honest. That will do it I am fairly sure.

[Gladwin]

You would have to have whistleblowers to make the regulatory board work. There should also be some incentive for the whistleblowers to come forward. Otherwise, coming forward would be a career ending act for an accountant, especially an Andersen accountant.

[Voltage]

I believe the whistleblower approach has worked well in Cuba. There it is usually used against parents by children, but we could certainly import the procedure here.

[L,TOWM]

Good point. Everything else would be reactive.

What is more likely is that the professional liability insurance providers are going to pull out of the business. Then the public won't have to demand government take over the attest function, because no one will want to do it...

[L,TOWM]

Not enough brainwashing stations................yet.

[steve50]

The quality of federal oversight the last 10 years is a great endorsement for them to take over.

[L,TOWM]

True, however, corporations paying for a "clean" opinion letter to the lowest bidder has drawbacks also.

Understand, I am not in favor of making the attest function in this country another bureaucracy, but a few more billions lost on top of clean opinion letters that should not have been signed, and...