TED DAVID, anchor:
As a result of the Enron scandal, the accounting profession nd its practices have come under fire. Today the American Institute of Certified Public Accountants made a major announcement regarding the relationship between auditing and consulting within the same firm.
Barry Melancon is president and CEO of the AICPA and he joins us with more on today's announcement.
Good to have you with us.
Mr. BARRY MELANCON (CEO, American Institute of Certified Public Accountants):
Hi, Ted.
DAVID:
Exactly what--what did you folks come out with today?
Mr. MELANCON:
Well, we said today that in order to really focus debate on the things that we think are very important to make sure that we don't have the potential of another Enron, that we need to get this issue off the table. And so we're saying we would not oppose a solution that would say that an auditing firm for public companies would not be able to do internal audit outsourcing or systems IT work.
(Graphic on screen)
AICPA Statement Not opposed to legislature imposing limits on services accounting firms may provide to the companies they audit.
DAVID:
No other firms have been behind that concept for a while. In fact, I guess SEC chair Arthur Levitt--then SEC chair Arthur Levitt, two years ago came up with a similar idea. What took you so long at the AICPA to go along with this?
Mr. MELANCON:
Well, we really don't think it's the pr--the source of the problem.
DAVID:
Mm-hmm.
Mr. MELANCON:
And, you know, what happen when Arthur was chairman is that there was--adopting a rule that limited some of these services and scaled back others. And we ended up in a place of supporting that after some debate with then-chairman Arthur Levitt. The fact of the matter is, though, is that really, if we would have had this rule in place before, it would not have prevented Enron. And in order really to focus on that, the systematic issues that need to be, which are much broader, we just want to do our part first and restore the confidence in the markets and get this--this issue moving to a broader debate.
DAVID:
Mm-hmm. Is Deloitte likely to go on? From what I understand once Pricewaterhouse's offering goes through Deloitte will be the only one who has not signed onto this.
Mr. MELANCON:
Well, Deloitte & Touche will have to speak for Deloitte & Touche.
DAVID:
Mm-hmm.
Mr. MELANCON:
The fact of the matter is that if this is enacted or adopted as a rule by the SEC then, of course, it would be applicable to all public company audits.
DAVID:
Mm-hmm. How--how much are accounting fees likely to go up as a result of this separation? Only in a sense from what I understand the fees are far more lucrative on the consulting side than they are on the accounting side. So do you have to make--make up the difference?
Mr. MELANCON:
That's--that's somewhat of a misnomer out there.
DAVID:
OK.
Mr. MELANCON:
The firms actually are profitable from an auditing perspective as you would expect, it's a business that they're in.
DAVID:
Oh, sure. But are they as profitable?
Mr. MELANCON:
Well, you know, they have different people working on these issues. I think firms are going to have to make some structural changes. And I don't think it's as easy as just making that statement.
DAVID:
How much of a black eye has the Enron scandal and Arthur Andersen, for that matter, given the accounting industry? And--and an unfair black eye.
Mr. MELANCON:
You know, it's really an unfair--that--that's a good question. We have 350,000 men and women in the CPA profession across this country drawing the line in the sand doing the right thing, servicing small business, giving good solid advice to help the economy all along the way and we can't lose that through this process.
DAVID:
Mm-hmm.
Mr. MELANCON:
But we are very sensitive to the results of Enron and we're concerned about it. This is a profession of over a hundred years that has built its trust in the--in the market place on public confidence. And we're--we're committed to living up to that.
DAVID:
Is there any anecdotal evidence that you're aware of that Andersen has lost accounts or, you know, clients who are there say, `You know what, I don't want to risk having the taint of Arthur Andersen signing off on my--my papers'?
Mr. MELANCON:
Well, I don't know specifically of, you know, what client situation are happening with Andersen of not. I will say that I know that there are many thousands of men and women in Andersen just like there are throughout the profession trying to do the right thing.
DAVID:
Let me ask you this: What do you make of the document shredding? And I ask because my dad who passed away in '97 was a CPA. This man's 1972 1040s are still sitting in a file cabinet someplace. And I mean he inculcated me, you know, you hang onto things as long and here you have accountants doing the diametric opposite of what you would think you would want to do, which is hang on to documents, unless there's a good reason to get rid of them.
Mr. MELANCON:
Well, I can say the profession does not tolerate inappropriate action that might be occurring in that area. I do think, however, there are an awful lot of investigations going on and none of us really know all the facts. But if, in fact, as some people are alluding to--happened, that's not tolerable in the profession.
DAVID:
Mm-hmm. Ken Lay will--will we believe take the stand before Congress on--on Monday and assuming he does not take his Fifth Amendment right and does testify, what do you think we might hear from him on Monday?
Mr. MELANCON:
I really can't speculate on the individual actions or the individual activities of Enron. I'm sure we'll all be tuned in, though.
DAVID:
Are there other Enrons out there? Are there other Arthur Andersens out there?
Mr. MELANCON:
Well, I think, you know, we have 45,000 firms in this country and, as I said, they're doing the right thing and trying to do the right thing. And I think every firm out there is redoubling its efforts right now to live up to the public confidence.
DAVID:
Bottom-line, you guys have a busy season ahead so we wish you well. April 15th remains a deadline no matter what else is going on and we thank you for joining us today.
Mr. MELANCON:
Thank you very much.
DAVID:
Barry Melancon is president and CEO of the AICPA.
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