Treasury Secretary Henry Paulson said that U.S. rulemakers should consider adopting "principles-based" regulations and accounting standards, in a speech at the Capital Markets Competitiveness Conference.Paulson said that in particular, there should be a focus on three issues in the U.S. - the country's regulatory structure, its accounting industry, and its legal and corporate governance environment.
While he said that the principles behind, and most of the results of, the Sarbanes-Oxley Act have been largely positive, there is still a need to be vigilant that the country's markets remain the best in the world.
Paulson said that close attention should be paid to conducting a cost-benefit analysis of new regulations. He added that the cumulative impact of regulatory changes has specifically affected the interaction between auditors, corporate management and boards - not necessarily constructively.
Paulson also questioned whether the concentration of the major accounting firms is a sustainable business model for the profession, as well as whether or not the system is producing high-quality audits and attracting talented auditors.
