In the days and weeks following Enron and Andersens' dual falls from grace, regulators, lawmakers and editorial page editors sparked a groundswell of support for the first real accounting reform in many decades.

Securities and Exchange Commission Chairman Harvey Pitt announced plans to create a new oversight board to watch the accountants, legislators sent their staff scurrying to draft new laws to once and for all end the conflict of auditing and consulting for the same client; and newspapers around the globe agreed – it’s time, way past time, for real change.

But a funny thing happened on the way to the president’s desk.

The accounting industry lobby – which gave more in campaign contributions to both Republicans and Democrats during the 2000 elections than Enron could ever have mustered – worked fast and furiously behind the scenes and has managed to stall every major piece of legislation aimed in its direction.

According to the nonpartisan Center for Responsive Politics, between 1989 and 2001 accounting firms spent nearly $39 million on political contributions, reaching more than half the current members of the House and 94 out of 100 senators.

That’s a heck of a lot of money, and it apparently buys them a lot of clout.

During an interview with accounting trade magazine editors in April, American Institute of CPAs president Barry Melancon admitted that the organization was already lobbying Congress about any legislation which "could have the potential for unintended consequences that could actually deter quality, that maybe sound good as far as a solution, but in fact have some practical and marketplace limitations."

Reading between the lines, this apparently meant any legislation whatsoever that aimed to take power away from the Institute and accountants in deciding just how the profession will be policed.

This week, New Jersey Senator Jon Corzine admitted publicly what the AICPA and others already knew – no accounting reform legislation has a snowball’s chance in Hell of passing this year. Although the House easily passed a watered-down reform bill, the Senate still hasn’t taken up its own version. And a stronger bill proposed by Senate Banking Committee Chairman Paul Sarbanes, D-Md., has been postponed because some powerful Republicans on the committee strongly oppose it.

Corzine and fellow Democrat, Sen. Chris Dodd, introduced a bill earlier this year to reform the profession, and features of that bill figure in the Sarbanes legislation, including restrictions on consulting work for audit clients and creation of an independent accounting oversight board.

Corzine says he doesn’t expect any bill to reach the president’s desk this year, "thanks to stalling tactics and intense corporate lobbying that's designed to prevent any meaningful change."

The scene unfolding in the Capitol is eerily reminiscent of the late 1990s when former SEC Chairman Arthur Levitt pushed for accounting industry reform, Corzine told reporters. "Lobbying pressure stifled his efforts then, and those same forces are being brought to bear to stifle substantive reform now."

As a senator who’s probably been on the receiving end of this lobbying pressure, Corzine obviously knows what he’s talking about. And he’s right when he says that only real accounting reform can preserve the integrity of information upon which U.S. capital markets are based.

As Levitt noted in a 1998 speech, ‘Today American markets enjoy the confidence of the world. How many half-truths and accounting sleights of hand will it take to tarnish that faith?"

Apparently, at least a few more.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access