Accountants fight post-Enron reform

Posted 9:31AM on Wednesday 6th March 2002 ( 23 years ago )

WASHINGTON - The accounting industry is building up a lobbying campaign against Enron-related legislative proposals that would put new restrictions on auditors. Influential accountants are being urged to contact members of Congress, although the effort does not include Arthur Andersen, former auditor of collapsed Enron Corp. The memo by the American Institute of Certified Public Accountants went to some 3,000 members known as ``federal key persons'' who have relationships with lawmakers, AICPA spokesman Joel Allegretti said Tuesday from New York. The industry, which showed its strength in 2000 in opposing an auditor independence proposal by the former head of the Securities and Exchange Commission, now is moving against some of the legislation. The proposals would, for example, prohibit accounting firms from performing consulting and other services for companies whose books they audit. In response to Enron's collapse - which threw a spotlight on the role of the energy-trading company's longtime auditor, the Andersen accounting firm - Congress also is considering requiring companies to switch auditors every few years. The new lobbying push by the American Institute of Certified Public Accountants does not include Andersen, one of the Big Five accounting firms and a member of the accounting trade group. ``It's not our agenda,'' Andersen spokesman Charlie Leonard said Tuesday. He said Andersen supports an accounting ``reform agenda,'' through legislation or new SEC rules, designed to restore public confidence in accounting and company financial reports. Former SEC chairman Arthur Levitt bore the brunt of the accounting industry's opposition in 2002. Asked Tuesday about the new lobbying campaign, he said, ``I'm saddened that events of recent weeks have not converted (the AICPA) from being mainly an industry cheerleader to a champion of the public interest." U.S. Comptroller General David Walker, who heads Congress' General Accounting Office, testified at a Senate hearing Tuesday that the current system in which the accounting industry largely polices itself is too ``fragmented'' and doesn't provide adequate sanctions for auditors who violate the trust placed in them. Citing a new GAO report, Walker also said there is a ``growing mismatch'' between the SEC's oversight responsibilities and its limited budget and personnel. The SEC and the Justice Department are investigating Enron and Andersen. New restrictions on auditors of publicly traded companies would spill over to affect auditing of all companies, big or small, and federal and state government agencies, the AICPA warned its members in an ``action alert'' memo Monday. The group, which represents the Big Five accounting firms and the industry, called that the ``cascade effect.'' The memo thanked members for their efforts to reach lawmakers during the recent Presidents Day recess. ``Members of Congress must be made acutely aware of what would happen if (certified public accountants) were unable to provide consulting and tax services to their small-business clients - and they must be convinced that the cascade effect will occur,'' the memo says. ``This issue has the potential of being harmful in more profound ways than any issue we have faced.'' It was made public by Sen. Paul Sarbanes, D-Md., chairman of the Senate Banking Committee, at Tuesday's hearing on accounting issues raised by the Enron failure. ``It's interesting to see these alarm bells being sounded,'' Sarbanes said. The accounting industry contributed $6.9 million to presidential, House and Senate candidates in the 2000 election cycle, including $4.1 million to incumbents, according to data compiled by the Center for Responsive Politics. In a big flap in the summer of 2000, the accounting industry lobbied lawmakers, who in turn convinced Levitt to water down a new rule imposing limits on the kinds of consulting services that accounting firms can provide their clients.

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