Senator Paul Sarbanes has announced that the Senate Banking Committee will meet on June 18, 2002 to mark up the "Public Company Accounting Reform and Investor Protection Act of 2002." The American Institute of CPAs (AICPA) called this bill a "de facto government takeover of the accounting profession." The AICPA and some of the large accounting firms have been working through Sen. Phil Gramm to block the bill.
A key provision of the Sarbanes bill, as originally drafted, is an authorization for the new public company accounting oversight board to adopt any portion of any statement of generally accepted auditing standards (GAAS) or other standards as its own rules. To avoid confusion, the revised version is expected to clarify that the board's authority extends to auditing, quality control and ethics rules needed to "govern the conduct of audits for public companies."
The original draft also limited the services accounting firms can offer to audit clients. The revised draft is expected to soften these limitations by allowing audit firms to appeal for special treatment from the new accounting oversight board. Corporate boards would still need to approve all non-audit work performed by an auditor as under the original bill. Neither the original nor the revised drafts will affect the services accounting firms can provide to non-public companies or to public companies for which they do not provide an audit.
Senator Gramm says his main problem with the Sarbanes bill has been and continues to be that it sets specific standards for accounting, auditing and independence. He reportedly told Reuters he has not yet reached an agreement with Sen. Sarbanes, and he would not rule out using procedural tactics to block a vote on the measure once it reached the Senate floor.
Observers have criticized Sen. Gramm's views and tactics for being anti-reform and causing undue delays in the law-making process. A report published in "Congressional Quarterly" said he told lobbyists their best strategy for killing the bill is to "stall, stall, stall." Sen. Gramm denies the report. (Accounting Scandal Brings Out the Worst in Gramm, Chertoff, Wall Street Journal, June 11, 2002.)
To date, the delaying tactics have consisted mainly of a list of approximately 80 questions submitted by Sen. Gramm about the original draft. Observers say some of these questions appear to address rather minor points that could presumably be delegated to the Securities and Exchange Commission (SEC). Examples include a question about the location of the new accounting oversight board and a query about limitations on the size or cost of its office space.