New York — In a meeting in late November with the partnership of Big Four firm KPMG, former Securities and Exchange Commission chair Arthur Levitt said that auditors must make the investing public their top priority.
“First and foremost, auditors must put investors first,” he said. “For too long, auditors have put management first. While they pay your fees, they are not your ultimate customers; investors are.”
Levitt’s talk, which ranged from financial reporting and the Financial Accounting Standards Board to governance and accounting education, coincided with KPMG testimony before a Senate subcommittee investigating the marketing of abusive tax shelters by accounting firms.
“After all, nothing is more important than restoring the public’s confidence in the integrity of the product, the honesty of the auditors, and the fairness of the system,” Levitt said.
Levitt also said that, prior to his appearance at KPMG, the last time he spoke before an accounting group was at the American Institute of CPAs’ Fall meeting of Council in October 2000 in Las Vegas. At that meeting, Levitt said that his intention was to work with the profession to “craft rules that would both nourish public confidence and lay a foundation
for public trust in years and decades to come. Unfortunately, we did not move quickly or resolutely enough.”
Levitt said that when he assumed the chairman’s post at the SEC, the Dow hit 3,700, and when he left it hit 10,600.
“That incredible bull market built up a huge amount of wealth, but it also tore down a lot of ethical standards,” he said. “The symptoms first arose in the executive suites. Enron, WorldCom and the rest brought to the public’s attention the sad truth that CEOs were managing the numbers, not necessarily managing their companies.”
Levitt also asked for the profession’s help in improving
accounting education and recruiting a new generation of auditors and accountants.
“I ask you to use your influence to get men and women sitting in those chairs who can convey the importance of the career these students are embarking on, who can produce students who have a grasp of the full range of views on the key issues of the day, and have a keen appreciation of the importance of ethical standards,” he said.
The former SEC chair described those in the accounting profession as “private sector actors with a public role to play.”
“The accounting profession is a profession like no other — and, in my mind, one of the most noble in our marketplace,” he said. “In most businesses, the watchword is: ‘The customer is always right.’ In yours, you are charged with telling your customer when he’s wrong.”
Said Levitt, “What other profession is enshrined in our nation’s securities laws to serve no interest but the public’s? What other profession so directly holds the keys to public confidence — the lifeblood of our markets? I can think of none other but yours.”
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