Accounting Industry Sets New Rules
NEW YORK (AP) _ Following revelations of widespread rule-breaking at a major accounting firm, an industry group is adopting new guidelines to make sure accountants maintain their distance from the companies they scrutinize.
The proposals announced Tuesday by the American Institute of Certified Public Accountants came less than a month after an independent review found that nearly half the partners at PricewaterhouseCoopers reported having violated rules prohibiting them from owning stock in companies they audit.
The widespread violations embarrassed the public accounting profession, whose mission is to serve as independent arbiters of the way publicly traded companies keep their books.
The Securities and Exchange Commission, which is continuing its investigation of PricewaterhouseCoopers, gave the new guidelines a cautious welcome.
``This is a first step in ensuring that the firms comply with elementary independence rules,″ said SEC spokesman Chris Ullman. ``But while systems changes are helpful, the culture needs to change as well.″
The new rules call for the nation’s top five accounting firms to set up more rigorous internal control systems, include training programs for accountants and strengthening inspection processes. The changes are expected to cost about $25 million.
The proposals also call for formalizing disciplinary steps for rule violators and modernizing language used in the rules about stock ownership.
Michael Conway, chairman of the group’s SEC Practice Section Executive Committee, said too many of the rules ``have become disconnected from the realities of how business is conducted.″
Barry Melancon, president of the accountants’ group, told reporters in a conference call that he expected most of the new provisions to be in place by the end of March.
In addition to PWC, the other five major accounting firms _ which dominate the industry _ are Andersen Worldwide, KPMG Peat Marwick, Deloitte & Touche and Ernst & Young.