Academic journal article Journal of Accountancy

IMA to Levitt: No More Rules, Please

Academic journal article Journal of Accountancy

IMA to Levitt: No More Rules, Please

Article excerpt

The accountants who help run U.S. corporations are concerned that the SEC's recent displeasure with the performance of certain companies' audit committees may lead to rule-making overkill. Their apprehension stems from SEC Chairman Arthur Levitt's comments last fall, criticizing a lack of "meaningful disclosure" in the current audit process and calling for changes at CPA firms, in corporate management and for audit committees. (See "Arthur Levitt Addresses `Illusions,'" JofA, Dec.98, page 12).

Included in Levitt's nine-point call to action was a proposal for a blue-ribbon panel to recommend changes for audit committees. Unveiled in September 1998, the panel is a joint project of the New York Stock Exchange and National Association of Securities Dealers.

Richard Swanson, CMA, executive director of the Institute of Management Accountants, got a chance to respond to Levitt's criticisms when he was given an opportunity to address the panel in December. In a discussion with the Journal, Swanson summarized his remarks and commented, from a management viewpoint, on the state of audit committees. "The most important message I tried to get across to the panel was that we have to be careful about being too prescriptive," he told the Journal. "The problem isn't a lack of regulation or guidelines but that, by adding more rules, you end up eliminating the flexibility and judgment needed by management, boards and audit committees."

Swanson said, in his opening comments to the panel, "To a large extent, we believe that the recent spate of high-profile abuses that led to your committee's charter resulted more from `execution' failures in management, board or audit committee oversight than from any lack of `rules' as to what the audit committees should De doing or now they should be staffed. …

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