Mr. Chairman, I would like to thank the Chairman of the Securities Exchange Commission (SEC) and all of our witnesses for testifying today. I also applaud you for holding this very timely hearing.
I am very interested in hearing from all of our witnesses on the auditor independence issue. I would also like to thank Chairman Levitt for meeting with me yesterday. This is a very controversial issue. It seems to me that both sides have dug their heels in, but I hope that is not the case. I hope the sec and the affected firms will talk and I hope both sides will negotiate in good faith.
This proposed rule has caused a major amount of angst among a couple of the big 5 firms, a couple of others are ok with it, as long as it has some modifications. The firms that do not like the proposed rule feel that it will force them to sell the consulting arms of their business. I do not believe that is the chairman's intention, but it may very well be the practical implication of this proposal.
No one wants audits that will be unduly influenced by other business relationships. But I do believe that if an accounting firm's consulting arm influences an audit, they will be punished by the market much worse than an action the sec would take. During the S&L crisis, accounting firms who issued shoddy audits were hit very hard. The market punished them severely. I tend to believe the market can ensure audits are truly independent, but I am interested in hearing from the chairman, in more detail, why he believes this is not the case.
This is a tough issue, we want investors to have good, clean, neutral audits. But we also do not want to be overly regulatory and chase ghosts that do not exist. I look forward to hearing from all of our witnesses and I look forward to their insight on this tough issue.
Thank you Mr. Chairman.