SEC offers proposal for accounting board

By Marcy Gordon
Associated Press

WASHINGTON — Federal regulators yesterday put forward the government's own Enron-inspired plan to tighten oversight of the accounting industry by creating an independent monitoring body with disciplinary powers.

The Securities and Exchange Commission opened to public comment a Bush administration proposal creating a new private-sector board to oversee the accounting industry and discipline auditors, replacing the current system in which the industry largely polices itself.

"We're experiencing a significant loss of investor confidence in public companies, their audited financial statements and the accounting profession," SEC Chairman Harvey Pitt said before the vote. "Our proposal will help restore investor faith by ensuring strong and effective regulation of the accounting profession."

Senate Majority Leader Tom Daschle, D-S.D., quickly assailed the SEC proposal as "a toothless tiger that has no real merit."

The SEC plan doesn't go as far as a bill that advanced Tuesday in the Democratic-controlled Senate, which also would restrict accounting firms from doing some lucrative consulting services for companies they audit.

"It is the same business that we have had now for sometime," Daschle said. "I hope that Mr. Pitt and others who are advocating something as innocuous as this will have second thoughts and will reconsider."

Legislation passed by the Republican-led House in April, meanwhile, has been criticized by consumer groups as too weak to bolster investor confidence.

Longtime Enron Corp. auditor Arthur Andersen LLP, convicted Saturday on a federal charge of obstructing justice, told the SEC that by Aug. 31 it will cease auditing publicly traded companies — the heart of its business — as required by an SEC rule for any firm convicted of a felony.

The SEC voted to open its proposal to public comment for 60 days. Pitt and other SEC officials stressed the importance of having a new system of accounting oversight in place by year's end — through new SEC rules if Congress hasn't enacted legislation by then.

"Immediate action is necessary," Pitt said. "Some speculate we are competing with Congress to see who gets to solve our crisis of confidence. No such rivalry exists. ... We will work with both houses of Congress in the development of legislative solutions to problems we've identified."

The SEC is proposing a new oversight board with at least six of its nine members — including its chairman and vice chairman — to come from outside the accounting industry. The board, which in turn would be overseen by the SEC, would not have subpoena power as the SEC does but could fine auditors or accounting firms or suspend or bar them from practicing.

The board would be financed with mandatory fees from accounting firms and corporations.