SEC gets resistance to new finance regs

0 Comments | Insight on the News, Nov 12, 2002 | by Jamie Dettmer

Bickering about corporate-accounting reform measures passed by Congress this summer is likely to continue for months to come. And reform advocates fear that the Securities and Exchange Commission (SEC), under pressure from Capitol Hill and the accounting profession, is likely to weaken new rules when it comes to their implementation. The SEC has to come up with rules based on the measures passed by Congress this summer in the Sarbanes-Oxley Act and, in most cases, those new rules have to be introduced by January 2003.

The accounting profession has mounted a massive lobbying campaign, the first target of which was to sabotage the appointment of retired pension-giant chief executive officer John Biggs as the chairman of the new Public Company Accounting Oversight Board. Biggs, who had been offered the job informally by SEC Chairman Harvey Pitt (he also received the approval of the Fed's Alan Greenspan and Treasury Secretary Paul O'Neill), favors the board coming up with new and stringent auditing standards. The auditing industry wants the oversight board to adopt the existing standards--the ones that allowed Enron, among others, to mask balance-sheet problems.

As of this writing, Biggs' chances of securing the job looked slim. Pitt, under pressure from lobbied offices on Capitol Hill, was backtracking on his initial pick.

The accounting profession also has set its sights on trying to persuade the SEC to come up with lots of exceptions to Sarbanes-Oxley to stop accounting firms from performing a plethora of nonauditing services for clients they are auditing. Critics say that the lucrative nonaudit work encourages accountants to turn a blind eye toward corporate problems or financial inconsistencies, as Arthur Andersen did with the energy giant Enron.