SEC and Senate Banking Committee put forth proposals for new regulation of public company auditors.

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"This model sends a loud and clear message that the era of self-regulation of the accounting profession is over," said Securities and Exchange Commission Chairman Harvey Pitt in describing the commission's far-reaching plan to regulate auditors of public company financial statements. The proposal, which the SEC approved for public comment on June 20, would create a Public Accountability Board--a private sector board that would be "wholly independent" of the accounting profession and designed to address "accountants' ethical lapses or competence deficiencies."

Funding for the PAB would come from all public companies and their audit firms. The proposal calls for a board consisting of nine members, at least six of whom must be public members (i.e., not accountants). Practicing or retired accountants could hold the remaining three seats, but they would not be allowed to vote on any disciplinary matters.

The SEC proposal followed on the heels of the Senate Banking Committee's approval of legislation creating a new Public Company Accounting Oversight Board with authority to establish auditing and ethics rules.

Initially, the Senate was to take up the Senate Banking Committee's bill in Sept., and the SEC's proposal, with a comment period ending Sept. 3, would be implemented by year-end. But with the alleged accounting scandal and looming bankruptcy at WorldCom coming to light in late June, the pace of legislative action will quicken.

The profession is committed to participating with Congress, the SEC and the investment community to achieve meaningful reform that restores public confidence in the U.S. capital markets and financial reporting system, including creation of a new Public Board to be responsible for discipline and quality monitoring for public company auditors. (For more on the...