Truth and Accountability in Accounting Act

I am pleased to stand with my colleagues this morning to introduce the Truth and Accountability in Accounting Act. A bill such as this has been needed for years. A few hardy souls have even pushed to enact some of the provisions it contains. Unfortunately, but not surprisingly, they were defeated by powerful lobbying groups and their friends here on Capitol Hill.

The President has suggested 10 points to good accounting, but, I’m sorry to say, points regardless of their number are not enough. Legislation is needed, and we are pleased to provide it. I also note that I will be working with Chairman Tauzin to assess whether broader changes in accounting governance in this country are necessary.

It has been a long time coming, but the time is finally ripe to introduce and enact strong, sensible, targeted legislation that puts investors and employees ahead of greedy corporations and their less than truthful green eyeshaded accountants.

This bill will help put a stop to the shenanigans and shady activities that led to a string of accounting debacles that have culminated in the single largest bankruptcy in the history of this country.

How will it accomplish this feat? I’ll tell you.

• It will mandate auditor independence. Consulting for auditing clients will be banned, auditor rotation will be required every seven years, and the revolving door between auditor and corporate client will be firmly shut for a much needed two-year cooling off period.

• It will hold senior management accountable for the accuracy and completeness of the company's financial statements and for the internal controls and internal audit procedures necessary to produce honest numbers and guard against illegal acts.

• It will create an independent and expert regulatory Board for the accounting profession.

• It will require the Federal Energy Regulatory Commission to adopt criteria that will make it more difficult to exempt electricity marketers like Enron from reporting requirements relating to the issuance of securities and assumption of liabilities that could affect their financial soundness.

• And, it will improve the resolution of accounting standards issues by the Financial Accounting Standards Board through enhanced oversight by the Securities and Exchange Commission and General Accounting Office.

In 1995 Congress played a large role in weakening securities regulation by passing perilous legislation that President Clinton had the foresight to veto. So I am also cosponsoring the bills introduced by Reps. Markey and LaFalce that would restore liability and accountability for accountants and other professionals.

The Truth and Accountability in Accounting Act, together with these two bills, will help fix the problems in the accounting profession and elsewhere that the Enron debacle has highlighted.

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(Contact: Laura Sheehan, 202-225-3641)