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Watch out accountants, you have no idea the insanity coming.

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SEC Proposes New Accounting Oversight Body

By MARCY GORDON
.c The Associated Press

WASHINGTON (June 20) - Federal regulators on Thursday 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 told reporters at the Capitol. ''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 being 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 funded with mandatory fees from accounting firms and corporations.

The Senate bill, approved Tuesday by the Senate Banking Committee on a a 17-4 vote, would give a new Public Company Accounting Oversight Board authority to establish auditing and ethics rules. Two members would have to be accountants; the other three must not have worked in the accounting industry.

All five members would be appointed by the SEC - which would oversee the new board - in consultation with the Treasury Department and the Federal Reserve.

Compared with the House-passed version, the Senate bill restricts a much wider range of consulting and other non-auditing services that accounting firms can provide to their audit clients, including bookkeeping, financial systems design and human resources and legal services. Accountants would be allowed to provide tax services if the company's audit committee gave its approval.

Critics of current practices say some accountants have become too cozy with the companies they audit, threatening the integrity of financial reports and undermining investor confidence.

The Senate bill also would require the SEC to impose new rules on financial analysts to prevent conflicts of interest. The rules go further than those recently adopted by the market watchdog agency.

It was endorsed by consumer groups, labor unions, former Federal Reserve Chairman Paul Volcker, who was hired by Andersen in February to make internal reforms, and other influential figures.

The SEC has been instituting a number of rule changes proposed by President Bush in early March, as the Enron controversy threatened to inflict political damage on the White House. Enron executives have been among Bush's chief political benefactors.

Last week, for example, the SEC moved closer to requiring faster and broader disclosure of company changes and making chief executive officers personally vouch for the accuracy of their companies' financial reports.

AP-NY-06-20-02 1319EDT
 

Stephen J. Vertin MAI

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Bob:

Your title is fitting. I was thinking the exact same thing when I read a similar report yesterday.

Steve Vertin
 

Terrel L. Shields

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Frontline had a good program on the Enron mess a few nights ago. Joe Liebermann was shown reaming Enron in recent Senate hearings, then they showed his statements before congress in 1994 when the accounting overseer FISB tried to institute rules requiring companies to show stock options as expenses. He raved and ranted against regulation then.

Not to pick on him...only 8 or 9 Senators have shown any backbone and tried to get more oversight and regulation upon this run amuck situation. Sickening.
 
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