For the first time in recent history, the Chairman of the SEC blasted the way that auditors do their jobs, and suggested the need for a full time self-regulatory body to ensure the credibility of audits.

Addressing a blue ribbon panel investigating the effectiveness of audits, Levitt sharply criticized auditors as playing a major role in the disturbing trend of company's "managing" their earnings.

Mr. Levitt criticized the Big Five accounting firms for distancing themselves from the very audits that they increasingly use to cross-sell their consulting services, as they now "think of themselves as 'multi-disciplinary organizations.' " He said he has "grave concerns" that the audit process "may be diminished, perhaps even sacrificed in the name of more financial and commercial opportunities."

Mr. Levitt further questioned the ability of the profession to regulate itself, and suggested that all the regulatory bodies are "stacked with accountants" making it difficult to address the issues. He further questioned the ability of the AICPA to effectively oversee the audit problems at the Big 5 firms, because of the large number of small firms that are representative of the membership.

AICPA repesentatives responded that none of the members of the Public Oversight Board come from auditing firms, and added that even with high profile audit failures, the profession boasts a 99.7% success rate with public audits. "It's not news when 1000 airplanes land safely every day," says AICPA President Barry Melancon.