Congressional measures target accounting and corporate ills - Strategic Intelligence - Brief Article

HR Magazine, August, 2002 by Steve Bates

In July, Congress was moving toward enacting legislation creating more oversight of the accounting industry and increasing penalties for corporate wrongdoing in the wake of scandals involving Enron, WorldCom and several other large U.S.-based companies.

At press time, conferees from the Senate and House of Representatives were preparing to close the gaps between bills passed by the Senate in mid-July and the House in April, before the trickle of news accounts of insider deals, alleged accounting irregularities and other questionable conduct by executives at major corporations turned into a flood that swamped consumer confidence in business.

The Senate and House measures are similar in approach. Both envision stepped-up oversight of auditors of publicly traded companies, though the stronger Senate measure would direct the federal Securities and Exchange Commission to appoint a full-time board to handle the task. Both bills attempt to prevent auditing firms from providing most non-audit services, such as business consulting.

In addition, the Senate and House measures seek to ensure that corporate officers and directors give up gains from stock sales during a period of time preceding a restatement of corporate earnings. Publicly traded companies would have to disclose loans to their officers or directors, or would be banned from making such loans. And stock sales by senior executives or by directors would have to be disclosed almost immediately.

Both chambers have approved measures that would increase sentences for corporate fraud.

Steve Bates is senior writer for HR Magazine.