Levitt, renowned for giving audit firms a tough time during his chairmanship at the Securities & Exchange Commission, told the hearing: ‘Healthy and resilient financial markets depend on the accountability of every one of its key actors – managers, auditors, directors, analysts, lawyers, ratings agencies, standards setters and regulators.’
He suggested far-reaching changes in regulation of financial markets in order to ‘repair trust in those on whom investors depend’.
Levitt, who was succeeded by Harvey Pitt last year, suggested more disclosure of Wall Street analysts’ financial interests and the rotation of audit firms, among other things.
‘For years, we’ve known that analysts’ compensation is tied to their ability to bring in or support investment banking deals. Analysts also should not be allowed to trade the stock of any company for which they have issued a recommendation in the last 30 days,’ he said.
After years of failed attempts to tighten regulation on the relationships between audit firms and their clients, Levitt received a rather perfunctory and tardy pat on the back from one of his staunch detractors, Senator Robert G. Torricelli, a democrat from New Jersey, who said: ‘We were wrong. You were right.’
Torricelli pressured the SEC in 2000 to abandon proposals that would have barred accounting firms from carrying out auditing and consulting work for the same client, as Andersen did for Enron. He was one of 13 senators who intervened to overturn the plan.
Levitt also called for a more expedient system to update accounting rules through increased funding from stock exchanges, banks and mutual funds, as well as accountancy firms.
Click here to listen to the comments of Accountancy Age editor Damian Wild about the implicaton for Andersen with regard to the Enron collapse, as part of interview on the BBC.
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