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The House on Wednesday passed its accounting reform bill by a vote of 334 to 90. The bill creates an independent auditor oversight body under the U.S. Securities and Exchange Commission to monitor and impose sanctions on accounting firms. It also bans auditors from some consulting work, including internal audits and financial system design work. House Financial Services Committee Chairman Michael G. Oxley, R-Ohio, and Rep. Richard H. Baker, R-La., sponsored the bill. “Today, we’re acting for America’s employees, retirees, and investors,” Oxley said in his closing statement. “At the same time, we recognize that every company in America is not an Enron, every company is not a Global Crossing.” While most Democrats’ amendments to the bill were rejected, an amendment offered by Rep. Michael E. Capuano, D-Mass., that put more members without an accounting industry background on the audit oversight board did make it through. Capuano’s amendment makes it so the five-member board consists of two members in the accounting profession, two directors that have not been accountants for the past two years and one member that has never been a practicing accountant. “I want people on the [audit oversight] board that are financially literate but at the same time are not allied with the accounting industry,” Capuano said. “The only way to do that is to have someone on the board that is not a member of the accounting profession.” Despite Capuano’s success with his amendment, the House Democrats do not feel that real reform has been enacted, and instead are looking to the Senate and its more stringent accounting reform provisions. A Senate bill backed by Sens. Christopher J. Dodd, D-Conn., and Jon S. Corzine, D-N.J., has stronger measures in mind. Both Senate and House bills require independent directors on the audit oversight committee. But only the Dodd-Corzine bill defines “independent members” by requiring that those directors not have ties to accounting firms and accounting advocacy organizations, according to Barbara Roper, at Washington-based Consumer Federation of America. Meanwhile, the Oxley bill has no definition of independence and could be misinterpreted. Further, it permits the accounting industry to participate in the funding of audit oversight committee, which could lead to “manipulation” of the body’s agenda, Roper said. Under the Dodd-Corzine bill, the accounting industry would be prohibited from funding the board. Another Senate bill, sponsored by Sen. Bill Nelson, D-Fla., would provide more stringent accounting rules, including prohibiting an accountant from providing management consulting or non-audit related services in the same year it provides audit services. It also would require auditors to rotate every seven years. Other stronger Senate provisions likely to pass in the final legislation are: requirements that a company’s independent audit committee approve the accountant’s tax and other non-audit work and a stipulation of a one-year “cooling off” period before an outside accountant could get a job at a company he or she had audited. Copyright (c)2002 TDD, LLC. All rights reserved.

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