WorldCom Disaster Seals the Fate of US Accounting Firms

By Cornwell, Rupert | The Independent (London, England), July 9, 2002 | Go to article overview
Save to active project

WorldCom Disaster Seals the Fate of US Accounting Firms

Cornwell, Rupert, The Independent (London, England)

IT BEARS the ponderous title of Public Company Accounting Reform And Investor Protection Act of 2002. But the Bill sponsored by the Senate Banking Committee chairman Paul Sarbanes, on which debate started yesterday, could be the basis for the clean up of the US auditing industry for which public opinion is clamouring.

As recently as three weeks ago, there were doubts the measure would ever make it to the Senate floor, such was the resistance from many Republicans and the potent accounting industry lobby. But the mood has been transformed by the WorldCom scandal, the latest in a string of corporate debacles stretching back to the Enron bankruptcy last December. The public wants action now, and the quietly spoken Mr Sarbanes is about to provide it.

The core of his bill is a new regulatory body for the accounting industry, with wide powers to oversee auditors, to set strict limits to their relationships with their customers, crack down on insider trading and impose new rules on stock analysts. Under the Sarbanes plan, no more than two people employed by the accounting industry would be allowed to serve on the five- man oversight board.

The bill would also: largely prevent accounting firms from providing consulting services to their customers; require the rotation of lead auditors (but not the accounting firm); and impose a ban on document shredding for seven years.

The crux, however, is the regulatory board. The US accounting industry, led by the American Institute of Certified Public Accountants (AICPA), opposes the Sarbanes proposal on the grounds that it would effectively lead to people outside the industry determining its standards.

Therein lies the biggest difference between the Senate measure and one passed by the House of Representatives on 24 April, the so- called "Oxley Bill", sponsored by Michael Oxley, the Republican Congressman who heads the House Financial Services Committee. The Oxley Bill, supported by the AICPA, also calls for a new supervisory body.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

WorldCom Disaster Seals the Fate of US Accounting Firms


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?