New Rules, New Responsibilities Journal of Accountancy (08/00) Vol. 190, No. 2 p.53; Zacharias, Carol A. N.
In the last decade, the speed and volume of financial
communications put pressure on individuals and companies.
Companies that did not fare well received the full wrath of the
financial markets and litigation machines. As companies became
more efficient with financial disclosures, questions arose about
the integrity of company financials. Regulators started paying
close attention to certain company devices. Overstating
restructuring charges, acquisition accounting to overstate future
earnings, recognizing sales before completion, and deferring
expenses to improve reported results were all meticulously
reviewed. SEC chairman Arthur Levitt's answer to "the numbers
game" was the creation of the Blue Ribbon Committee on Improving
the Effectiveness of Corporate Audits. The committee's purpose
was a study of management's role in financial disclosures. The
newly formed committee issued a report in February 1999. The
report recommended that the different securities exchanges and
the SEC enact rules providing audit committees with a
self-regulatory framework. Disclosure, transparency, and
accountability were the three main topics outlined in the
framework. These groups moved fast, developing, then
authorizing, such rules by 1999--and implementing them in 2000.