The accounting profession, whose public exposure has been limited to certifying annual reports, suddenly has found itself caught in the full glare of publicity.
Questions have been raised by federal regulators and Capitol Hill critics about whether independent auditors are really independent of their corporate clients.
The accounting firm, jarred by this sudden and growing hostility in Washington, have begun to take the offensive. Perhaps the leading reason for the accountants' recent woes are the revelations of illegalities by their corporate clients, whose books they certify as "in comformity with generally accepted accounting principles."
With some 350 companies in recent years admiting to bribes, kickbacks and other illegal payments both at home and abroad, these critics blame the accountants for not reporting to authorities these activities by their corporate clients.
With the illegal payments issue an opener, the whole accounting profession has come under scrutiny.
Beginning today, and continuing on Thursday for five days and in May, the Senate Subcomittee on Reports, Accounting and Management will hold hearings triggered by its massively critical study, published in December, called The Accounting Establishment.
That report concentrated on the so-called Big Eight accounting firms, which audit 85 per cent of the companies listed on two major stock exchanges and which enjoy annual revenues estimated at $500 million.
Sen. Lee Metcalf (D-Mont.), who a decade ago took on the electrical utilities industry, has become the source of the big accounting firms. Metcalf will head the subcommittee hearings beginning today, and one of his first witnesses will be mother critic of accountants, Rep. John E. Moss (D-Calif.)
In October, a Moss House Commerce Oversight and Investigations Subcommittee reported that self-regulation by the accounting profession was not enough. It recommended that the Securities and Exchange Commission "proscribe by rule" standards for accountants.
Reacting to all this, nearly all of the Big Eight have hired high-priced, and influential Washington law firms, according to the staff on the Metcalf subcommittee.
Arthur Andersen & Co. has retained Williams and Conally, Arthur Young Co. has Corcoran and Rowe, Coopers & Lybrand has Hughes, Hubbard, and Reed, Price Waterhouse & Co. has ARnold and Porter, Ernst & Ernst has attorney Chapman Rose as well as the public relations firm of Hill & Knowlton, Inc., and Haskins & Sells has Aiken, Gump, Hauer and Feld.
Peat, Marwick, Mitchell & Co., the biggest of the Big Eight, has not yet retained local counsel. But Walter E. Hanson, the senior partner, gives speeches around the country defending the profession against detractors.
Most of the political activities are being organized by the American Institute of Certified Public Accountants (AICPA). It is running a so-called "key man program," which is aimed at getting influential accountants in various congressional districts to push the industry's ideas to their representatives.
Repeated attempts yesterday to obtain comment on the "key man program" from the AICPA were unsuccessful.