MICHELLE CARUSO-CABRERA, co-anchor:
Stay with us. On Enron we have lot more at 5:20; we'll talk with the president of the Certified Public Accountants Association, Barry Melancon.
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(Excerpt from Capitol Hill hearing)
CARUSO-CABRERA: That was Representative Bill Tauzin, chairman of the House Energy and Commerce Committee, speaking at the House hearing on Enron's accounting problems. Joining us from Washington to discuss the situation is Barry Melancon. He's the president and CEO of the American Institute of Certified Public Accountants. Thanks for being here.
Mr. BARRY MELANCON (CEO, American Institute of Certified Public Accountants):
Thank you, Michelle. Good to be with you.
CARUSO-CABRERA:
Watching the--the hearings today, it seemed to me a lot of the Anderson testimony was trying to pin this on a rogue employee, that this was just one employee that had ordered the shredding of documents. As CEO of a company, do you think that's possible?
Mr. MELANCON:
Well, I don't know details of exactly how that happened but I can tell you that no one in this profession, and there are over 350,000 CPAs, condone a situation where information that was necessary in an investigation was not available. And--and there's a certain amount of anguish that we all suffer from the standpoint of what's happening with the Enron situation. But I also know that--that the leaders of--of over 45,000 CPA firms in this country are committed to doing the right things in the public interest, and it's a very bad situation.
CARUSO-CABRERA:
So, how could something like this have happened?
Mr. MELANCON:
Well, again, I don't know the details of exactly what happened, from that perspective. I do know that there are a lot of facts to yet be obtained and I think Congressman Tauzin in his opening comments even alluded to that. And the fact of the matter is--is that public accounting firms are committed to documentation from a work paper perspective, and I'm sure this firm, in fact, is committed to that as well. And it remains to be seen exactly what documents are in question here.
CARUSO-CABRERA:
What do you say to American investors, to Enron employees who have lost millions, to--to many in Congress who are asking whether or not the accounting profession can be trusted?
Mr. MELANCON:
Well, certainly the accounting profession can be trusted. This profession has over 100 years of credibility, over 100 years of meeting the public interest and, in fact, has been a critical component of the success and transparencies of the best capital markets in world here in America.
And the fact of the matter is--is that Chairman Pitt has asked us to step up, to make some changes, to go to greater levels of public participation, and we have stepped up first. But it's not simply one easy answer to this entire environment, it's a very complex situation. There are a lot of different issues that must be addressed, and I think some of the hearings today did focus on that broad array of issues.
CARUSO-CABRERA:
You say you stepped up in terms of changes. What changes?
Mr. MELANCON:
Well, we have agreed to make some changes in the regulatory structure over the CPA profession as it relates to discipline and monitoring of quality controls. Quality controls are the way CPA firms do audits. And the chairman has asked to us put a board together that's a majority of public members, non-auditors, not people in the profession, to make sure that they are managing this process, including the disciplinary process. And people who failed that process would not be eligible to do public company audits.
CARUSO-CABRERA:
Former SEC Chairman Arthur Levitt told CNBC today that he thinks Enron is symptomatic of something much larger going on in corporate America. Do you think there are more Enrons out there?
Mr. MELANCON:
Well, you know, Arthur was chairman of the SEC for an awful long time and saw an awful lot of things, including these reports that were filed as they related to the current Enron matter, and sometimes we fall into the trap of oversimplifying things. We live in a very complex world. Business reporting is very complex, but the fact of the matter is--is our accounting model, something that we've been speaking about as a profession for almost a decade now, needs to be changed, to be reflective of the economy that we live in today, as opposed to the economy that it grew up in, which was an industrial-based economy back in 30s and the 40s.
CARUSO-CABRERA:
A lot of people are saying now that the Enron situation highlights--that consulting firms and accounting firms should not be the same company. Do you agree?
Mr. MELANCON:
Well, you know, I testified on this matter not too long ago, when the SEC was adopting a rule. And I think it's important to understand that CPA firms provide a lot of services to their clients; tax work, for instance, which is a common element that most Americans expect. And CPAs around the country, in small towns, in large towns, big companies and small provide meaningful services that add value, great advice to businesses small and large, to be successful. The fact of the matter is--is that if we had an outright prohibition on this, Enron would have probably still occurred.
CARUSO-CABRERA:
Mm-hmm.
Mr. MELANCON:
And the rule has just been adopted, that basically the ink is not dry on, that outlaws several procedures or several things that can be done, limits others, and in fact, develops a system of transparency, which Author Levitt championed and we supported.
CARUSO-CABRERA:
All right. Thank you very much, Mr. Melancon.
Mr. MELANCON:
Thank you.