Senate Banking Committee Chairman Paul S. Sarbanes (D-Md.) is preparing legislation that would establish far stricter controls on the accounting profession than a bill passed by the House earlier this month.
Sarbanes has not released details of the bill, but sources familiar with the legislation said a key provision will closely mirror the regulatory framework proposed in March by Sens. Christopher J. Dodd (D-Conn.) and Jon S. Corzine (D-N.J.), both Banking Committee members.
Congressional aides cautioned that the Sarbanes bill is still being drafted and may be changed before it is introduced. But the sources said Sarbanes is closer to settling on his legislative response to the issues raised by the collapse of Enron Corp. and the role of its auditor, Arthur Andersen.
Sarbanes appears to be moving toward a proposal that, like the Dodd-Corzine bill, would create a five-member auditor oversight board, would restrict auditors from going directly to work for their corporate clients for two years, and would prohibit accountants from providing most consulting services to their audit clients. The House legislation would prohibit auditors from providing just two consulting services -- internal audits and computer system design.
Under Dodd-Corzine, the oversight board would set standards for auditors, conduct annual inspections of audit firms and have the power to investigate and discipline accountants. In contrast, the House bill would create an oversight board but allow the Securities and Exchange Commission to determine its powers.
The Sarbanes legislation is also expected to establish new rules dealing with the behavior of corporate officers and directors. Details have not yet been worked out.
Jesse Jacobs, a spokesman for Sarbanes, declined to comment on the specifics of the legislation, saying only that it was a "work in progress."
