Auditing Reform: Mission Accomplished!

But in this country, as soon as some company disagreed with the regulator, it would head straight to federal court to complain about "arbitrary" and "capricious" government oversight. In truth, the business community doesn't want to get lawyers out of the regulatory process -- just the government's lawyers.

Perhaps the biggest problem with "prudential" regulation is that, by its nature, it overlooks the worst kind of abuses -- those that become so commonplace that everyone thinks they're acceptable. Recent examples range from "managing" quarterly earnings to doling out hot stock offerings to favored customers. At some level, the lawyers, the auditors and the regulators understood that they violated basic principles of fair dealing. And yet few thought to question these practices.

In the end, it took whistle-blowers and outsiders like journalists and state attorneys general to expose these abuses and force new rules. But in the closed loop of a prudential regulator system, none of that would have happened. The whole idea is to keep the heathens out and work things out behind the scenes, without lawsuits, public sanctions or disclosure of embarrassing details.

And that brings us back to the good folks at Peekaboo.

Pardon my skepticism, but I have trouble believing that, as the PCAOB asks us to believe, the Big Four have miraculously transformed their corporate cultures, pushed out the bad apples and fixed all their quality-control problems.

Could it be true? Perhaps. But as long as the PCAOB shrouds its every action involving the Big Four under a cloak of prudential secrecy, we'll never know, will we?

Steven Pearlstein can be reached atpearlsteins@washpost.com.