Big Five Accounting Firms to Open Books to SEC
By Tim Arango
TheStreet.com/NYTimes.com Staff Reporter
6/7/00 1:36 PM ET
In response to a continuing inquiry into possible breaches in the independence of corporate auditors, the Big Five accounting firms have agreed to open up the investment portfolios of their partners and top managers to the Securities and Exchange Commission in exchange for immunity from enforcement, the SEC said Wednesday.
The so-called "look-back program" will review investments held by certain managers and partners for a period of at least nine months prior to March 31 to determine whether those employees held stock in firms they were auditing.
"This is a significant chapter in the commission's and the profession's efforts to reinforce the importance of auditor independence," Arthur Levitt, the SEC chairman, said in a statement. "This serious and comprehensive review will enhance investor confidence and lead to improved quality control systems going forward."
The firms agreed to hire independent counsel to conduct a review, and to report violations to the SEC. In return, the firms will not be subject to enforcement except for the most serious violations, such as when a firm itself or senior employees working on an audit own stock in a client.
The announcement comes a few weeks after Levitt, in a speech at New York University, criticized the accounting industry for cutting off financing for a public oversight board that delves into such conflicts of interests.
The historical roots of the issue date back about 20 years, when accounting firms branched into consulting, according to Geoffrey Pickard, a spokesman of the American Institute of Certified Public Accountants, which represents the nation's largest accounting firms.
Public confidence in the independence of auditors has suffered as well, Pickard said. Most firms, such as PricewaterhouseCoopers, are in the process of spinning off their consulting businesses, he said.
The Big Five accounting firms are PricewaterhouseCoopers, Deloitte and Touche, Arthur Anderson, Ernst & Young and KPMG.
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