Auditing in America
Auditing in America is a funny business. All publicly traded corporations are required to have their books audited once a year to insure the accuracy of their books. This would seem to be a well thought out plan. But not so. Auditing firms have developed a habit of looking the other way when they come across something that just doesn't seem right. They do so because they are worried, not about losing auditing business but at losing auditing consulting business with the companies they audit. You would think it would be wise to require auditing firms to not be able to provide auditing consulting services as well to the firms they audit.
But wait again. In the early 1990's, the head of the Securities and Exchange Commission proposed banning auditing firms from providing consulting services to corporations. The auditing firms didn't like that idea, so they contacted their US Congressmen and Senators to request they stop the head of the SEC from implementing such a rule. The auditing firms had reason to believe that their concerns would be met as they had provided hundreds of thousands of dollars to those very same Congressmen and Senators. Soon enough, the head of the SEC started receiving letters from the committee that provides the SEC's budget and that the agency had better forget about banning auditing consulting if they knew what was good for them. And so the head of the SEC (Authur Levitt) backed off and left things as they were.
Now these very same Congresses and Senators decry the failure of Enron. They want to know what Congress should do to insure no more Enrons occur.
Well Congress should do what they forced the SEC not to do ten years back. Ban consulting services by auditing firms for a start. And perhaps keep their hands in their pockets the next time the auditing firms' come by with another large campaign contribution.
(This opinion is based of the PBS Frontline program "Bigger Than Enron")
06/20/02 ( 407 )
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