- The Washington Times - Wednesday, March 6, 2002


The accounting industry is building a lobbying campaign against proposals in the wake of the Enron scandal that would put new restrictions on auditors.

Accounting firms are being urged to contact members of Congress, though the effort does not include Arthur Andersen, former auditor of collapsed Enron Corp.

The industry, which showed its clout in 2000 in opposing an auditor-independence proposal by the head of the Securities and Exchange Commission, is moving against legislation that would prohibit accounting firms from performing consulting and other services for companies whose books they audit.

In response to Enron's collapse which threw a spotlight on the role of the energy-trading company's longtime auditor, the Andersen accounting firm Congress also is considering requiring companies to switch auditors every few years.

The lobbying push by the American Institute of Certified Public Accountants does not include Andersen, one of the Big Five accounting firms and a member of the accounting trade group.

"It's not our agenda," Andersen spokesman Charlie Leonard said yesterday.

He said Andersen supports an accounting "reform agenda," through legislation or new SEC rules, designed to restore public confidence in accounting and company financial reports.

U.S. Comptroller General David Walker, who heads Congress' General Accounting Office, testified at a Senate hearing yesterday that the current system in which the accounting industry largely polices itself is too "fragmented" and doesn't provide adequate sanctions for auditors who violate the trust placed in them.

New restrictions on auditors of publicly traded companies would spill over to affect auditing of all companies, big or small, and federal and state government agencies, the accountants group warned its members in an "action alert" memo Monday. The group, which represents the Big Five accounting firms and the industry, called that the "cascade effect."

The memo thanked members for their efforts to reach lawmakers during the recent Presidents' Day recess.

"Members of Congress must be made acutely aware of what would happen if [certified public accountants] were unable to provide consulting and tax services to their small-business clients and they must be convinced that the cascade effect will occur," the memo says. "This issue has the potential of being harmful in more profound ways than any issue we have faced."

It was made public by Sen. Paul S. Sarbanes, Maryland Democrat, chairman of the Senate Banking, Housing and Urban Affairs Committee, at yesterday's hearing on accounting issues raised by the Enron failure.

"It's interesting to see these alarm bells being sounded," Mr. Sarbanes said.

A spokesman for the accountants group, Joel Allegretti, had no immediate comment.

The accounting industry contributed $6.9 million to presidential, House and Senate candidates in the 2000 election cycle, including $4.1 million to incumbents, according to data compiled by the Center for Responsive Politics.

In a big flap in the summer of 2000, the accounting industry lobbied lawmakers, who in turn convinced SEC Chairman Arthur Levitt to water down a new rule imposing limits on the kinds of consulting services that accounting firms can provide their clients.

Mr. Levitt and others were worried that accounting firms jeopardize their independence by becoming more financially dependent on the lucrative consulting work they do for companies they audit. Proponents of new rules say accounting firms need to be more independent of their clients to avoid conflicts of interest and preserve the integrity of company financial reports.

Twenty-one Republican members of Congress wrote Mr. Levitt accusing him of rushing the proposal through before a new administration took office in 2001.

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