NCPA - National Center for Policy Analysis

Restoring The Public's Trust in Accounting

February 4, 2002

The string of accounting meltdowns that recently culminated in the Enron fiasco has prompted a wide-ranging search for safeguards to help rehabilitate the accounting profession's reputation -- as well as protect investors.

Here are a few of the many suggestions:

  • Transfer both auditor regulation and discipline to a new self-regulatory body, possibly including public members on its board, but staffed and overseen by outsiders who would take over the review process.
  • There are numerous calls for auditing firms to divest themselves of consulting functions at firms they audit.
  • Another potential answer might be to mandate the rotation of auditors periodically.
  • Impose more "forensic" audits which would zero in on the "hot spots" which cause the most earnings restatements.

Some make the suggestion that employees of auditing firms not be allowed to switch into the firms they once audited. But that might infringe on such individuals' career freedoms.

Source: Nanette Byrnes, "Accounting in Crisis," Business Week, January 28, 2002.


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