Levitt, who was the chairman of the Securities and Exchange Commission for nearly eight years under the Clinton Administration, and who quit shortly after President George W Bush took office, was a thorn in the side of the Big Five for much of his tenure.
Two years ago he tried to institute a ban on auditors from providing IT and consulting services as well as conducting internal audits for their clients. The profession ganged up on him and threatened to take the SEC to court if he pushed his “scope-of-services” plan. He didn’t get the necessary support from Congress and had to back down.
Then along came Enron and the role played by Arthur Andersen, and suddenly Levitt’s ideas are back in vogue. On the very day that Kenneth Lay, the former Enron chairman, appeared before a congressional hearing and refused to answer any questions in case he incriminated himself, Levitt was waiting his turn to be questioned by the Senate Banking Committee. Even though the Big Five have voluntarily agreed to split their consulting and auditing practices, Levitt wants such moves to be made mandatory across the profession.
“I would now urge – at a minimum – that we go back and reconsider the limits,” Levitt told the hearing.
However, this time the SEC won’t face the wrath of the American Institute of Certified Public Accountants. Its president, Barry Melancon, said the organisation now recognises that the auditor independence issue is “front and centre.” And this time, Congress is on the warpath and is in no mood to allow the accounting profession to set its own guidelines. Statutes are already being drafted.
Levitt is now 73, but he never misses a chance to espouse his ideas. He has become a director of financial services firm Bloomberg, and is in the process of writing a book entitled Take on the Street. He comments regularly on Enron on Bloomberg’s television network and he writes a column in its Personal Finance magazine.
In his first article he uttered a now familiar cry: “The firms must raise their auditing standards, totally divorce consulting from auditing, and support a self-regulatory organisation that is not dependent on funding from an accounting industry trade group.”
As Banking Committee member Senator Tim Johnson said after the former SEC chairman’s testimony: “Mr. Levitt was ahead of his time.”
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