U.S. Representative Scott Garrett (Republican, New Jersey) was first elected to Congress in 2002, months after the passage of the Sarbanes-Oxley Act. A couple of weeks ago, he introduced legislation that would amend S-OX to require that PCAOB* enforcement actions against auditors be made public. This is a very positive development, but the way in which it came about is actually pretty disgusting.
In fact, much of the accounting provisions in S-Ox were tweaked to be palatable to the Big Four. Based on an email from Lynn Turner, former SEC Chief Accountant and a recent Bloomberg article, this is the background leading up to the recently proposed legislation to amend S-Ox.**
Prior to 1989, the SEC enforcement proceedings against auditors took place behind closed doors. The SEC changed its rules to make the proceedings public because the firms would drag out proceedings for years. In the meantime, investors [Read More...]