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CONFERENCE REPORT ON H.R. 3763, SARBANES-OXLEY ACT OF 2002 -- (Extensions of
Remarks - July 29, 2002)
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SPEECH OF
HON. DIANA DeGETTE
OF COLORADO
IN THE HOUSE OF REPRESENTATIVES
Thursday, July 25, 2002
- Ms. DeGETTE. Mr. Speaker, I rise in support of the conference report to
H.R. 3763, the ``Public Company Accounting Reform and Investor Protection
Act.'' This agreement accepts almost every Democratic proposal contained in
the ``Sarbanes'' bill and has only been altered by adding increased penalties
for corporate crimes. I am pleased that the Republicans in Congress agreed to
the much stronger Democratic proposals that will reach to the very roots of
the problems in corporate America that caused the collapse of companies like
Enron, WorldCom, and Adelphia. Unfortunately, the country will most likely
continue to see companies fall due to accounting improprieties and, while I
believe this is a strong bill, more must certainly be done. However, the
changes in our nation's financial accounting structure contained in this
agreement will strengthen the confidence and trust of investors and will
increase the transparency and acceptability of financial statements.
- The agreement that we are considering today is almost identical to the
Democratic proposals contained in the ``Sarbanes'' legislation that passed the
Senate 97-0. The fact that the Republicans accepted the Democrats' position
certainly shows that the Republicans in Congress are feeling the heat over
corporate accountability. After all, the American public trusts Democrats to
fix the problems in corporate America and to increase investor confidence in
the markets.
- The proposal offered by Republicans to deal with corporate abuse was to
increase penalties for corporate crime, coupled with weak, industry-controlled
standard-setting bodies. They wanted to deal only with the ``bad apples''
instead of getting to the heart of the problem. The conference committee
agreed to
[Page: E1413] GPO's PDF
accept
their increased penalties for crime. But, the conference committee recognized
that corporate abuses will not end until Congress makes changes that attack
the root of the problems. So the conferees accepted the Democratic proposals
almost in their entirety.
- As we have seen from the collapse of Enron and other large corporations,
auditors had guiding principles that were extremely weak and easily ignored by
accountants and corporate management. Additionally, accounting improprieties
were purposely overlooked because the auditors became too cozy with the
companies they audited and made huge profits from non-audit consulting
services. To address these problems, this agreement creates a new and
independent accounting board that has authority to establish auditing
standards, investigate accounting firms that conduct audits of publicly-traded
companies, and enforce their rules. The agreement also mandates auditor
independence and bans most non-audit consulting services.
- As we have seen in the past, much-needed accounting reforms were impeded
by industry officials who threatened to withhold funding from the Financial
Accounting Standards Board (FASB). The new auditing board and the current FASB
will be given an independent funding stream to ensure that important financial
standards will not be senselessly squashed by greedy industry executives.
- The agreement also increases and strengthens corporate governance by
requiring senior executives to attest to the accuracy of their company's
financial statements, under penalty of law. It also requires corporate
executives to repay any compensation or profits received as a result of their
accounting trickery.
- Unfortunately, this agreement overlooks some issues that must be
addressed, including expensing
stock options and mandatory
auditor rotation. Stock options
that are not included on a company's financial statements can misrepresent the
true value of a company. I am pleased that some companies have taken it upon
themselves to include employee stock options on their financial
statements and I am also pleased that the FASB has indicated that it will move
quickly on a rule for expensing
stock options. Additionally,
requiring companies to rotate their auditors is very important to ensure that
senior executives and the people auditing their companies do not become too
cozy and allow a company to get away with accounting tricks. While these
issues are not included in this agreement, I look forward to continue working
on finding ways to deal with them.