WASHINGTON – Three former Securities and Exchange Commission chief accountants 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, three former accounting chiefs released a letter warning of "devastating" impact 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, while some U.S. accountants have said 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 over a year ago with the collapse of Enron Corp..
The Public Company Accounting Oversight Board, which was established under the financial reform act, could not be reached for comment on the letter. But it issued a statement Monday scheduling the Thursday meeting and listing an agenda.
The board said it will consider proposed bylaws, hiring of an interim chief administrative officer, leasing of office space, and budgeting. In addition, it said it will hear a report from the market-regulating NASD about designing a Web-based registration system for board-regulated audit firms.
The bankruptcy of former energy trader Enron and later scandals at WorldCom Inc. and elsewhere sullied the reputations of accountants. Enron auditor Andersen, now all but defunct, was convicted of obstruction of justice in June for destroying Enron-related documents.
Sarbanes-Oxley ordered 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 bill authored by Sen. Paul Sarbanes and Rep. Michael Oxley, which is being phased in over several months, gave 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.
The three also urged the board to adopt the Sarbanes-Oxley limits on non-audit service sales without alteration and to do its own audit firm inspections, rather than hiring auditing firms to do them under contract.