SEC Chief Pushes Accounting Agenda
Securities and Exchange Commission Chairman Harvey L. Pitt reiterated Wednesday that in the wake of the Enron Corp. scandal, the accounting profession needs an oversight body that is not under the industry’s control.
Pitt’s remarks at the Securities Regulation Institute’s annual meeting in Coronado, Calif., underlined the rift between Pitt and the Public Oversight Board, the current industry supervisory panel.
Upset at not being consulted before Pitt last week unveiled his plan for revamping the accounting-oversight system, the POB’s five members voted unanimously Sunday to disband the panel, effective March 31. POB Chairman Charles A. Bowsher contends that Pitt’s plan would increase the accounting industry’s influence over the policing process.
The POB, founded in 1977, oversees peer reviews that auditing firms do of one another’s work. But the panel has been criticized for never issuing an unfavorable report on an accounting firm.
Pitt and Bowsher met briefly Wednesday before Pitt’s speech at the Hotel del Coronado, where Bowsher is today’s keynote speaker at the same conference.
The two men had what SEC spokeswoman Christi Harlan called “a useful and candid exchange,” but Bowsher and the POB did not rescind their decision.
The POB and the American Institute of Certified Public Accountants, the main industry trade group, have scheduled a meeting next week to discuss the situation.
The POB’s link with AICPA, which funds the board, is at the heart of Pitt’s objection.
“While we believe that the POB provides a good model for us to use to transition to a new disciplinary system,” Pitt said Wednesday, “we oppose any regulatory system that is directly under the control of a profession it is designed to discipline, as the POB-overseen process presently is.”
Although Pitt has not released details of his plan, he proposes that the new oversight system be financed by companies whose books are being audited, by financial markets and by other “people who use and benefit from our disclosure and auditing system.”
Bowsher’s concern is that a new panel “will come to be dominated by the profession,” Bowsher spokesman Cleve Corlett said. “It’s not the financing that worries Bowsher, it’s the makeup of the group,” Corlett added.
None of the five current POB members has direct ties with the accounting industry, although Bowsher, former head of the General Accounting Office (Congress’ investigative arm), and fellow member Donald J. Kirk were trained at major accounting firms.
Pitt has more-recent industry ties, having represented AICPA and the Andersen accounting firm--Enron’s auditor--as a lawyer before taking the SEC job. Pitt successfully fought to blunt the effects of proposed rules that would have barred auditors from doing certain kinds of consulting work for the firms they audit.
SEC spokeswoman Harlan also confirmed that Pitt has held a series of meetings in recent weeks with chief executives of the Big Five accounting firms to discuss proposed revisions in oversight.
Some analysts said the sniping between Pitt and the POB points up the difficulty of reaching a consensus on new accounting-industry regulation. For years, the industry has successfully fought back attempts at the federal level--including at the SEC--to tighten oversight rules and reduce the industry’s self-regulatory powers.
