Business Law Paper

1. Enforcement However much accounting standards may be perfected, investors go away not be protected if auditors do not correctly enforce the standards. In light of the rising numbers of auditing problems in recent years, culminating with Andersens widely publicized failures with respect to its audit of Enron, economic aid has been focused on verification of financial statements. Policymakers should concentrate on two basic approaches, which are not mutually inconsistent, only if ideally should be reinforcing: improved monitoring or precaution of auditors and improved incentives for auditors to carry out their work properly. Monitoring The most frequently discussed reform of the existing enforcement system is the creation of an independent form reporting to the SEC that would set and enforce auditing standards. SEC chairman Harvey Pitt has outlined, and the Bush administration has basically endorsed, a proposal for a new state-supported Regulatory Board (replacing the previous Public Oversight Board) that would have authority to set auditing standards and to investigate and penalize wayward auditors, even while charges are pending. Most of the members of the PRB would be independent of the accounting industry, while the functions of the Board would be financed by assessments on accountants and the firms they audit.

Critics have said the proposal does not go far enough. A better option, for a number of reasons, is to sojourn the investigation and enforcement functions within the SEC, while leaving the preparation and ending of audit standards for the auditing profession to an organization like the PRB. First, proponents of an independent body cannot credibly assert that the job of overseeing auditors is more complex than overseeing the comport exchanges, investigating fraud or insider trading, or carrying out the correspondence of the Commissions statutory agenda. If the reason for contracting out the supervising of auditors is that the SEC is short of staff and resources, as it clearly... If you want to decease a full essay, order it on our website: Orderessay

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