Undaunted by days of public pleas for more time and less restrictive guidelines from members of the accounting profession, Chairman of the SEC, Arthur Levitt, will appear in Washington today to make his case for auditor independence before Congress.
Mr. Levitt is expected to meet with heavy opposition from Republicans and other members of Congress who have complained that the strict guidelines would "force dramatic changes in the structure and business practices of accounting firms" and would require corporations "to pay increased costs for some types of accounting services."
Mr. Levitt contends that, "Nothing less than the public interest is at stake" and has repeatedly rejected pleas from representatives of the accountancy profession to allow for more time to address the guidelines and reconsider the severe nature of the all-encompassing restrictions on scope of services.
The proposed guidelines will force many accounting firms to give up the consultancy work they have built over the past two decades in the name of auditor independence. Supporters of the guidelines contend that many accounting firms use audit services as a means of getting a foot in the door with clients so that they can provide more lucrative consultancy services.
Twenty-one members of Congress have signed a letter accusing Mr. Levitt of attempting to rush the proposal through Congress before the administration changes in the fall elections. Not an unreasonable point, since there is a good chance that Mr. Levitt will resign when the new administration takes over.
Meanwhile, the Center for Responsive Politics reports that accounting firms have been busy making generous contributions to members of Congress and candidates running for election this fall. A coincidence? "The fact that enormous sums of money have been spent on lobbying this issue is irrelevant," to the importance of auditor independence to protect investors, according to Mr. Levitt.
Keep up to date with our full coverage of the SEC hearings.