WASHINGTON, July 15 (UPI) -- The Senate late Monday unanimously approved the most sweeping legislation to reform oversight of the accounting industry since the Great Depression. The measure creates an independent regulatory board to oversee accounting firms and bars accountants from also performing some consulting services for their clients.
Members of both parties said they hoped the bill would send a positive signal to investors and boost confidence in corporate America, which has seen its reputation tarnished in the wake of blowups at Enron Corp., Global Crossing and WorldCom Inc. It passed Monday in a 97 to 0 vote.
The measure's architect Sen. Paul Sarbanes, D-Md., called it a "major step contributing to the restoration of investor confidence.
"I think this marks the end of weak self-regulation with respect to public company auditors," Sarbanes said.
The bill's passage sets up a conference between Senate and House lawmakers who must reconcile vastly different pieces of legislation. The House bill creates a new accounting board staffed by other accountants and does not extend as much authority to the new board.
President Bush urged the House and Senate to put the bill on his desk by the August recess.
"I am pleased the Senate has now acted on a tough bill that shares my goals and includes all of the accounting and criminal reforms I proposed," Bush said. "We owe it to America's workers and shareholders to crackdown on wrongdoing and fix the system to prevent future abuses."
Senate Republican Leader Sen. Trent Lott, R-Miss., predicted the final bill sent to the president will look like the Senate's more rigorous version because of all the bad news that has hit Wall Street since the House acted April 24.
"There has been a lot that has happened in the last two months," Lott said. "I suspect (the final bill) will be pretty close to what the Senate has passed."
During debate Monday, the Senate set aside discussion of how companies treat executives' stock options. Sen. Phil Gramm, R-Texas, derailed an amendment by Sen. Carl Levin, D-Mich., ordering the Financial Accounting Standards Board to draft new rules on how to reflect those options in their books. Such options allow executives to buy company stock at a predetermined price.
Democrats last week pitched in to defeat a similar amendment by Sen. John McCain, R-Ariz., that would have required companies to count stock options as corporate expenses. Democrats said last week that Congress should not be in the business of setting accounting standards, which should be left to the experts.
"Congress should not be engaged in setting technical accounting rules," said Senate Majority Leader Sen. Tom Daschle, D-S.D., who supported the alternative drafted by Levin. "We should be seeking to do the reverse: to establish independent FASB that can help restore confidence in the accuracy of financial information."
Democrats have gone on the political offensive during the mushrooming accounting scandals punctuated most recently by news last month that WorldCom had overstated its cash flow by almost $4 billion.
Some Democrats said Monday the push in the Senate would do what President George W. Bush has failed to do: send a positive signal for jittery traders to boost confidence and hopefully stop skidding markets.
"I think the Senate is showing real leadership," Sen. Jon Corzine, D-N.J., told United Press International. "I think the president is significantly behind the curve."
Republicans said the Senate did include some components of Bush's plan -- such as penalties for white-collar criminals -- in the legislation. They also hoped the bill would head off a plunging Dow Jones Industrial Average.
"We have been a little bit disturbed by what has been happening in the markets the last couple of days," said Sen. Mike Enzi, D-Wyo., a member of the Senate Banking Committee that drafted the bill. "I do think this bill will help restore confidence in the market."
At its lowest point at midday Monday, the Dow had more than 400 points on a day when the president reiterated his call for corporate and individual responsibility in a speech at the University of Alabama-Birmingham. The Dow lost more than 600 points last week, during which the president made a major address on Wall Street on Tuesday.
The board established by the Senate legislation would be under the purview of the Securities and Exchange Commission, but with independent membership and the authority to investigate accountants and set accounting standards. In addition to barring accountants from also performing consulting services for their clients, the legislation creates a new felony for securities fraud with a 10-year jail term.
While signals from House Republicans have been mixed, Senate Republicans signaled Monday they might pressure their counterparts in the House to accept the more robust legislation passed by the Senate.
