Accounting World, Still Resisting Sunlight

By FLOYD NORRIS, NYT

The accounting business has sometimes had an attitude of — how shall I put it? — contempt for those who would regulate it. The people who run the major firms know best, and regulators should yield to their superior judgment.

Nowhere is that clearer than when regulators penalize partners of big firms. The Tammy Wynette song “Stand by Your Man” could be the industry’s anthem.

In 2001, when the Securities and Exchange Commission settled charges against Arthur Andersen for its involvement in financial fraud at Waste Management, a partner named Robert G. Kutsenda was banned for a year. He was not the partner in charge of the Waste Management audit, but an e-mail showed he had approved accounting that the S.E.C. said was improper.

While that settlement was being negotiated, Andersen put Mr. Kutsenda in charge of revising the firm’s “document retention” policy. The new policy encouraged the destruction of the kind of documents that became the evidence against him. His involvement became public later in 2001, when Andersen’s auditors cited that policy as justifying their destruction of documents related to audits at Enron. Regulators were not amused.

(More here.)