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Microcap & Penny Stocks : Zia Sun(zsun) -- Ignore unavailable to you. Want to Upgrade?

To: StockDung who wrote (6009)	12/8/1999 3:44:00 PM
From: Sir Auric Goldfinger	Respond to of 10354

SEC to charge auditor with violating new law By Peter Ramjug WASHINGTON, Dec 7 (Reuters) - The Securities and Exchange Commission said on Tuesday it intends to charge an auditor shortly with failing to comply with a tough new law that requires corporate accountants to report illegal acts to management, and if necessary, to the SEC. "You'll be hearing from us shortly (on this)," SEC enforcement director Richard Walker told hundreds of accountants here for a national meeting of the American Institute of Certified Public Accountants. Walker later explained that the agency will bring an enforcement action shortly against an auditor for violating a section of the Securities Exchange Act of 1934. That section, adopted by Congress in 1996 and fully enacted by the SEC a year later, requires auditors to bring illegal acts to the attention of their firms' senior management and audit committees. If managers fail to act, then auditors must report the problem to the SEC, according to the law. Walter Schuetze, chief accountant for enforcement at the agency, said the case would be the first ever filed by the agency under Section 10A. Neither Walker nor Schuetze would comment further on the upcoming case, but Walker said he is concerned that less than a dozen reports have been filed to date under the law. Auditors may not be fulfilling their responsibilities, he said, adding, "While I know it is no easy task to be charged with ferreting out fraud and under some circumstances reporting it to to SEC, both the law and integrity of our markets require that this task be performed." The SEC has been on a campaign for more than a year to clean up the financial reporting process. It is concerned that companies are toying with their books in order to meet earnings projections. One prong of this campaign is getting accounting firms that audit corporate financial statements to avoid offering other services that might jeopardize their independence as auditors. The integrity of some company audits has not been up to par because audit committee members are either too cozy with company management or are not competent enough to conduct a proper audit, SEC officials led by Chairman Arthur Levitt have contended. Walker told the CPAs that his agency is investigating possible conflicts of interest between auditing firms holding stock in companies they audit, a relationship that could lead to companies releasing false financial statements. "We have a number of matters under investigation involving potential independence violations ranging from stock ownership of audit clients to the provision of both auditing and consulting services to the same client," he said. He did not elaborate on those investigations, but said, "We view auditor independence as critically important to the integrity of the financial reporting system." Walker said the SEC has observed an "unacceptably high number of busted audits, and the pace of change in strengthening other important requirements, most notably auditor independence, remains unacceptably slow." The SEC, whose 1999 fiscal year ended Sept. 30, filed about 90 actions out of 525 total in fiscal 1999 alleging a range of financial statement and reporting irregularities. That was a 15 percent rise over the 79 cases filed in 1998, Walker said. The director of the SEC's enforcement division also warned that the commission will be taking a closer look at intentional misstatements by company executives, especially if the wrongdoing was done to manage earnings that would ultimately trigger financial performance incentives. "We will give closer scrutiny to intentional misstatements by senior management, even if in small amounts, and particularly if designed to manage earnings. He said, "We brought 18 actions last year specifically alleging that the purpose of the fraud was to engage earnings management for the purpose of meeting projections and compensation benchmarks." 18:31 12-07-99