Speaking to a risk management symposium at Fordham University, Federal Reserve Governor Susan Bies commented on lessons learned from recent accounting scandals. She said confidence can be restored in the capital markets, if companies improve their risk reporting and accountants return to their core values.

Ms. Bies explained that the work of accountants is "the core foundation of the American capitalist system." She said she finds it sad that the group that should be "leading the charge" to strengthen the focus of their responsibility has been "very silent." But individual accountants can still help by encouraging companies to focus on risks, even without a standard accounting framework for risk disclosures.

"Recent events have demonstrated that the complexity and size of modern corporations create significant market risk exposures that give management and the board of directors little time to react after serious breaches in internal controls become known," she said. Yet a recent study showed that 45% of directors surveyed said their firm didn't have any formal method of identifying risk. ("Fed Bies: Risk Management Must Improve," Wall Street Journal, October 8, 2002.)

A key concern expressed by Ms. Bies at Fordham is the perceived unwillingness of accountants to get back to basics. "The whole AICPA profession is just focused on cross-selling, cross-selling, cross-selling and not the core values," she said. "And until we get back to the core values, I worry about how we're going to restore confidence."

In another speech earlier this month, Ms. Bies said the Financial Accounting Standards Board (FASB) had "missed an opportunity" by not proposing more disclosure of special purpose entities (SPEs) in its recent exposure draft. "The exposure draft focuses on the choice of consolidating or not consolidating an SPE but says little about disclosure," she said. "If FASB's goal is to make the financial reporting of firms' dealings with SPEs more informative, disclosure of the effect of the SPE on the firm would be equally necessary."