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 débâcles 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. But the standards it enforces would be set by the accounting industry. It would also have fewer powers to discipline auditors and only modestly curtail their consultancy services.
According to Tom Daschle, the Senate Majority Leader, it is likely to pass with an overwhelming majority of perhaps 80 of the 100 senators. But many pitfalls await. Some Democrats have tabled even tougher amendments, which could delay its passage. Then the bill must be reconciled with the Oxley Bill before a final measure is enacted and sent to President George Bush for signature into law.
Today Mr Bush will set out his thinking in a major speech on Wall Street, in which he is expected to call for jail terms, rather than mere fines, for the "bad apples" who he says are a small minority of America's corporate leaders.
Another man under the gun is the Securities and Exchange Commission chairman Harvey Pitt, a Bush appointee whose resignation has been demanded by Mr Daschle. But after being widely criticised for over-cosy ties with the accounting industry, Mr Pitt is now fighting back.
After WorldCom dropped its $4bn (£3bn) mis-statement bombshell on 25 June, he announced that chief executives and chief financial officers would have to sign off in person on the veracity of their company's accounts. This should make it easier for the SEC, the main market regulatory body in the US, to bring criminal prosecutions of corporate miscreants. Mr Pitt also favours an independent agency to supervise accountants, and discipline them if necessary.
The outcome of auditing reform in the US is thus impossible to predict. If public confidence is to be restored, Congress will have to come up with an agreed bill before it breaks up for November's mid-term elections. But, some say, there is a risk it will do too much rather than too little, and burden US industry with an unwarranted array of new regulations.
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