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.

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