Former SEC Accounting Chiefs Urge New Board to Be Tough

Three former Securities and Exchange Commission chief accountants on Monday called on the new U.S. accounting oversight board to resist pressures to soften accounting reforms ordered last summer by Congress.

As the board set its first formal meeting for Thursday at SEC headquarters in Washington, D.C., three former accounting chiefs released a letter warning of a “devastating” effect on investors if the board falls short in cracking down on accountants.

Lynn Turner, Michael Sutton and Walter Schuetze said it is “critical to the integrity of the U.S. capital markets that the public trust in independent auditors be restored.”

Several accounting firms have complained to regulators that the auditor rules under development are too harsh. Some non-U.S. firms have said they want blanket exemptions, and some U.S. accountants have said that barring certain non-audit services would be impractical.

In the letter to board member Charles Niemeier, the three called on the board to aggressively implement accounting reforms ordered by the Sarbanes-Oxley Act passed by Congress in July after a wave of corporate scandals that began more than a year ago with Enron Corp.’s collapse.

The Public Company Accounting Oversight Board, which was established under the financial reform act, couldn’t be reached for comment on the letter. But it issued a statement Monday scheduling the Thursday meeting and listing an agenda, which included mostly administrative matters.

The Sarbanes-Oxley Act orders the SEC and the accounting board to bar corporate auditors from selling certain other services to audit clients and to regularly inspect auditing firms and discipline those that failed to meet standards. The law gives the board the option of either adopting existing auditing standards or writing its own.

“The PCAOB should establish auditing standards, rather than delegating that role to the auditing profession,” the three former chief accountants wrote.