AICPA supports fraud detection bill.

The American Institute of CPAs endorsed an amended version of HR 574, the Financial Fraud Detection and Disclosure Act. The bill, sponsored by Congressman Ron Wyden (D-Ore.), seeks to ensure earlier disclosure of possible management fraud.

The endorsement was made after the profession worked closely with the House Telecommunications and Finance Subcommittee leadership to reach an accord on legislative language saying principal responsibility for setting accounting standards remains in the private sector, subject to oversight by the Securities and Exchange Commission.

The Institute opposed a version of the bill introduced in 1992 that did not contain this language. That version was passed by the House but failed to win Senate approval.

In a letter to Congressman Edward J. Markey (D-Mass.), chairman of the House subcommittee and a cosponsor of the bill, AICPA board chairman Jake Netterville expressed the Institute's support of the revised bill. "When enacted, the measure will provide for more rapid notification to the SEC of illegal acts that have not been properly addressed," Netterville said.

"By passing this bill," he added, "Congress will send a strong signal to public companies and their auditors that the public wants and expects reliable financial reporting."

No new bureaucracy. According Netterville, the amended bill addresses the Institute's major concern making it clear that principal responsibility for setting auditing standards will remain in the private sector, subject to appropriate SEC oversight.

Specifically, the bill grants the SEC authority to modify or supplement auditing standards dealing with the detection of illegal acts, related-party transactions and the evaluation of an entity's ability to continue as a going concern if it determines the private sector standard-setting body is unable or unwilling to take appropriate action on a timely basis.

"The legislation does not create a new bureaucracy or mandate government intrusion into the accounting profession," said Netterville. "The primary responsibility for setting auditing standards will remain where the expertise is - the private sector."

He continued, "We believe this legislation demonstrates the ability of public officials and the private sector to work together to maintain a financial reporting system that meets public needs. The accounting profession is committed to a financial reporting system that provides investors with the information they require, and our special committee on financial reporting is actively exploring ways to make financial reports more relevant and valuable to all financial decision makers."