U.S. Chamber Asks Congress for Softening of Rule on Auditing
By Kathleen Day
Washington Post Staff Writer
Monday, January 23, 2006
The U.S. Chamber of Commerce is asking the federal
government to soften a rule adopted after financial scandals
that accounting firms failed to expose at Enron Corp.,
WorldCom Inc., Freddie Mac and other major U.S. companies.
The chamber, which lobbies for businesses large and small,
wants the Securities and Exchange Commission to allow
accounting firms to perform audits for any company within a
year of having provided consulting or other services for
The current rule bars a company from hiring as its auditor
any accounting firm that has performed other services for it
within five years. The SEC adopted the rule three years ago
as required by the Sarbanes-Oxley Act, which Congress passed
to tighten corporate accountability and make it harder for
companies to mislead investors about corporate financial
The chamber makes its request in a policy paper it will
release publicly today and circulated to some people last
week. It is the group's latest effort to weaken some
provisions of Sarbanes-Oxley, which it says has added
burdensome and costly business regulations.
Supporters of Sarbanes-Oxley say a waiting period of a year
or less could put auditors in the position of reviewing
their own work and create conflicts of interest that the law
was intended to prevent.
In its paper, the chamber also asks Congress to set clear
guidelines on when the Justice Department can bring criminal
charges against companies. The clarification is needed to
"rein in" the department, whose successful prosecution of
the accounting firm Arthur Andersen LLP put the company out
of business and "led directly to severe job dislocations for
28,000 people," the paper says.
Uncertainty about the circumstances under which accounting
firms can be indicted has raised the cost of their liability
insurance, according to the paper, written by David C.
Chavern, a chamber vice president. That has imposed a big
barrier to new firms entering the field, he wrote.
The Justice Department recently dropped its case against
Andersen after the Supreme Court reversed the conviction in
May. The court ruled unanimously that jury instructions
from the trial judge were too broad and allowed jurors to
find the company guilty even if its officials did not intend
to break the law.
The chamber's paper also calls on the SEC, the Public
Company Accounting Oversight Board -- an audit review panel
established under Sarbanes-Oxley -- and other government
agencies to promote creation of large accounting firms that
could compete with the four companies that dominate the
business. That would give companies more choices when
hiring firms to review their financial statements and, in
the process, be better for the nation's economy, the paper
SEC spokesman John Nester said the agency would not comment
on the chamber's requests because it has not seen the
paper. In December, SEC Chairman Christopher Cox said in a
speech to a group of accountants that he wants to make sure
that government rules don't impede competition among
Justice Department spokesman Bryan Sierra also would not
comment because no one there has seen the chamber's paper.
The department has issued clear guidance on factors it
considers to determine whether to prosecute a company, he