Barbara Boxer: “today, I am introducing the Auditor Independence Act of 2002. The Act directs the Securities and Exchange Commission…”

“today, I am introducing the Auditor Independence Act of 2002. The Act directs the Securities and Exchange Commission, SEC, to issue regulations prohibiting accounting firms from providing management consulting services for the companies they audit and barring accounting firms from providing any other non-audit related services that could result in a potential conflict of interest. Using the rule that former SEC Chairman Arthur Levitt proposed in 2000 as a model, my legislation removes the actual conflict of interest as well as the perception of a conflict of interest that results when an auditing firm provides a client with consulting and auditing services. The scandal resulting from the relationship between Enron and Arthur Andersen is only one example of the overdue need for this reform. In November 2001, Enron disclosed that it had overstated profits by more than $580 million since 1997. That means that Enron lied to investors about its earnings and the Arthur Andersen auditors failed to expose that lie in 1997, 1998, 1999, and 2000. During each of those years, Arthur Andersen worked as both auditor and consultant to Enron. In 2000 alone, Enron paid Arthur Andersen $27 million for its audit work and paid the firm $28 million in management consulting fees. In auditing Enron, Arthur Andersen clearly made a series of errors.”