<< back to "Top Reforms Needed" -- 1 -- 2 -- 3 -- 4 -- 5 -- 6 -- 7 -- 8 -- 9 -- 10 >>

Further Reading On Auditor Independence And Oversight

The Consumer Federation of America White Paper on the Enron Collapse and the Need for Investor Reform (February 2002) http://www.consumerfed.org/enron_auditor_rpt.pdf

The SEC Proposed Rule On Auditor Independence (July 2000) http://www.sec.gov/rules/proposed/34-42994.htm

The SEC Final Rule on Auditor Independence (November 2000) http://www.sec.gov/rules/final/33-7919.htm

Testimony of John Biggs, Chairman, Teachers' Insurance and Annuity Association -- College Retirement Equities Fund (TIAA-CREF) before the Senate Banking Committee, February 27, 2002 http://banking.senate.gov/02_02hrg/022702/biggs.htm

Washington Post three-part investigative series on the accounting industry After Enron, New Doubts About Auditors: By David S. Hilzenrath Washington Post Staff Writer Wednesday, December 5, 2001, Page One, Link to Part 1 http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&node=&contentId=A58165-2001Dec4

SEC press release http://www.sec.gov/news/press/2001-62.txt and settlement order http://www.sec.gov/litigation/admin/34-44444.htm June 2001, In the Matter of Arthur Andersen, Administrative Proceeding File No. 3-10513 concerning audit of Waste Management, Inc.

Proposed Federal Legislation To Establish Accounting Independence and Oversight (Selected proposals):

1) "Comprehensive Investor Protection Act (CIPA) of 2002," Reps. LaFalce (D-NY)-Gephardt (D-MO) and others http://www.house.gov/banking_democrats/pr_020228c.htm

Although this bill introduced by House Financial Services Committee ranking member John LaFalce and Democratic leader Richard Gephardt does not impose a full ban on non-audit services, its severe restrictions on non-audit services are based on the SEC's governing principles. The bill also establishes a strong, independent oversight board.

Auditor Independence: The bill would enhance auditor independence, by banning auditors from providing certain types of non-audit services, requiring direct audit committee oversight of any non-audit services that are provided, closing the revolving door between auditors and their audit clients, requiring periodic rotation of auditors, and clarifying that audit committees, not company managers, are directly responsible for hiring and supervising outside auditors.

1. Auditor Oversight: CIPA would create a strong public regulator. The Public Auditing Regulatory Board (PARB), with clearly defined duties and powers mandated by Congress, to provide comprehensive oversight of accountants.

2. A super majority of a 7-member board would be selected from the public and would represent the interests of shareholders, investors, pension beneficiaries and future retirees.

3. An Appointment Committee, consisting of the Chairman of the Board, the Chairman of the SEC, and the Comptroller General shall select the 6 remaining Board members from nominations received from groups representing institutional investors and pension funds (public employee pension plans, pension plans organized pursuant to the Taft-Hartley Act (i.e., union-related pension plans), and pension plans organized pursuant to ERISA.)

Senate Proposals:

"The Auditor Independence Act of 2002," S. 1896, Senator Boxer's (D-CA) proposal requires the SEC to establish rules based on its four governing principles on auditor independence, although the does not call for a full ban on provision of non-audit services. http://thomas.loc.gov/cgi-bin/bdquery/z?d107:s.01896:

<< back to "Top Reforms Needed" -- 1 -- 2 -- 3 -- 4 -- 5 -- 6 -- 7 -- 8 -- 9 -- 10 >>