Legislators Unveil Corporate and Auditing Accountability Act

On February 13, 2002, law-makers introduced legislation to restore investor confidence in the accounting profession and capital markets in response to the Enron collapse.

Known as the Corporate and Auditing Accountability, Responsibility and Transparency Act of 2002 (CARTA), the proposed legislation would:

  • Prohibit audit firms from offering certain types of consulting services.
  • Create a public oversight board and Public Regulatory Organizations (PROs) to certify any auditor wishing to audit the financial statements of a publicly traded company.
  • Require full disclosure of off-balance sheet transactions, such as the special-purpose entities made famous by Enron.
  • Require companies to disclose information about their financial health more quickly and in plain English.
  • Make it unlawful for anyone associated with a public company to interfere with the auditing process.
  • Prohibit corporate executives from buying or selling company stock during a 401(k) lock-out period.
  • Increase the budget of the Securities and Exchange Commission (SEC).
  • Require the SEC to conduct regular and thorough reviews of the largest and most widely traded companies.
  • Require the SEC to oversee new rules governing the activities of securities analysts.
  • Require the SEC to determine whether additional initiatives are needed with respect to corporate information disclosure, credit rating agencies, and corporate governance.

At a press conference held on Capitol Hill, House Financial Services Chair Michael G. Oxley said the proposed legislation would restore investor confidence without instituting draconian restrictions. Under CARTA, as it is currently envisioned, accounting firms would still be allowed to offer tax services. CARTA is expected to be the leading accounting reform bill in the House of Representatives, but Rep. Oxley said, “As we move forward, we may need to consider additional measures.” Other legislators are expected to introduce bills to address tax services in more detail.

-Rosemary Schlank

You may like these other stories...

A proposal issued by the Governmental Accounting Standards Board (GASB) last week explains how fair value measurement should be defined for state and local government financial reporting.The exposure draft, Fair Value...
By Jason Bramwell The board of trustees of the Financial Accounting Foundation (FAF) finalized a new policy on November 19 that provides the Governmental Accounting Standards Board (GASB) with direction on what...
By Jason Bramwell The Governmental Accounting Standards Board (GASB) is now offering a free online toolkit designed to assist preparers and auditors of state and local government pension plans with implementing new...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.