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Pitt pushes ahead on accounting panel. (Business Briefs).

As Congress heads into its summer recess, still bogged down in debating a host of bills dealing with accounting and corporate governance issues, Securities and Exchange Commission Chairman Harvey Pitt is signaling that he's not willing to simply wait for legislators to act amid the continuing governance crisis.

Pitt says he wants to have a new panel that would oversee the accounting profession, dubbed the Public Accountability Board (PAB), in place by the end of the year. "If legislation is enacted, we will, of course, recede," Pitt said in an announcement. "But if final legislation is not forthcoming, we want to be in a position to commence our new regulatory system before year-end."

Not surprisingly, the governance issue has become a political football, with Senate Republicans opposing more sweeping reforms offered this spring by Sen. Paul Sarbanes, a Maryland Democrat. A more modest bill sponsored by Rep. Michael Oxley (R-Ohio) has already passed the House. In an election year, many observers say the odds for a reform package acceptable to both sides are fairly long. Former SEC Chairman Arthur Levitt, speaking at a panel discussion in New York at the end of May, said that 33 bills were pending in Congress, but he voiced doubts that any would eventually be enacted.

Pitt, a former corporate attorney who had represented the major accounting firms in his private practice, has stirred controversy of his own over meetings with the head of KPMG LLP. Critics have claimed that he is too close to the accounting industry, and that reforms coming from the SEC have been too soft and too slow in coming.

But Pitt appears to have seized on the accounting panel as something truly important, that the SEC "must move forward to establish at the earliest possible moment." As the SEC envisions the board, the first members would be picked by the agency, with subsequent appointments subject to its review. Funding would come from mandatory fees paid by accounting firms, as well as from corporations.

Only PAB member auditors could submit opinions to the SEC, and they would be subject to regular review by the PAB staff. Those who didn't meet the standards could find their firm's right to practice before the SEC revoked.

If Pitt were able to push through the board concept by the end of the year, "he would pre-empt a lot of the legislation" being proposed, says Sandra Kinsey, a former SEC attorney who's now a partner with the law firm of Hogan & Hartson in Washington. While Pitt's initial proposal was considered too weak, she says, it now appears more in line with broad reforms along the lines of those in the Oxley bill.

A legislation solution to corporate governance reform "would be a blunt instrument," Kinsey argues. "This really calls for a more nuanced regulatory approach." She adds: "No one thinks this [board concept] is the silver bullet that will cure all the problems, but it is a step that needs to be taken. It was clear even before Enron that the [accounting oversight] process was not working very well, and that stronger regulations were needed."
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Title Annotation:Securities and Exchange Commission Chairman Harvey Pitt
Publication:Financial Executive
Article Type:Brief Article
Geographic Code:1USA
Date:Jul 1, 2002
Previous Article:From the editor.
Next Article:CA moves to quiet critics. (Business Briefs).

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