Recent allegations about potential fraud, cover ups, document shredding and criminal investigations in the Enron scandal have once again given former SEC Chairman Arthur Levitt a platform to speak out against the status quo in the accounting profession.
Responding to Andersen's disclosure last week about destroying documents, Mr. Levitt told the Wall Street Journal that it is time for outside auditors to accept tough oversight through a new government-sponsored self-regulatory organization.
Mr. Levitt waged a campaign against the self-regulation of the profession during his tenure at the SEC. He clashed many times with the AICPA's ability to oversee the profession, and again called for "the industry to discount the AICPA as an oversight mechanism and put in place something new," he told the Wall Street Journal.
Mr. Levitt will again have a public platform to call for change in the regulatory process as he is scheduled to testify at the upcoming Senate Government Affairs Committee investigation of Enron. He hasn't yet decided if he will advocate new rules disallowing consulting fees for outside auditors.
Levitt Urges Caution Over Reports of US Earnings
Mr. Levitt urged investors to ask tough questions and be skeptical about the earnings reports from US companies for the fourth quarter of 2001. The September 11 attacks and the recession have provided corporate America with camouflage to overstate losses, and investors should scrutinize reports at a higher level.
Mr. Levitt cautions investors to be aware of a rise in earnings manipulation due to recent accounting rule changes. "Unquestionably there is more financial information available to investors today - but it is being more severely massaged by companies to gain a competitive advantage," Mr. Levitt warned this weekend.