Chairman Sarbanes, thank you for holding today's hearing to discuss issues related to the oversight of the accounting profession, audit quality and the formulation of accounting standards. Also, I thank Chairman Pitt for agreeing to speak with us today. I am sure that these are challenging times at the SEC, and I particularly appreciate your efforts to prepare for and attend today's hearing.
Today's hearing is the culmination of a series of 10 hearings that have enabled us to gain a thorough understanding of the pertinent issues. Mr. Chairman, I want to commend you for the constructive tenor of these hearings, and for allowing us to accomplish a great deal in a relatively short period of time.
As I have noted previously, the Enron debacle and other recent high-profile corporate bankruptcies represent a national scandal, one with terrible human and financial cost. Concern about audit and accounting practices have dogged many of these business failures. Furthermore, these accounting woes appear to be widespread, as is evidenced by the recent increase in the number of earnings restatements precipitated by accounting problems.
These developments have shaken the financial markets and left lingering doubts in the minds of investors about the integrity of the individuals and firms responsible for providing honest and unbiased financial information. We in Congress need to make sure that regulators and industry participants implement changes to address these issues.
The most obvious way to make progress is to give the SEC the personnel and financial resources it needs to take strong enforcement measures against illegal accounting practices. I was disappointed that President Bush failed to provide these resources, even though Congress spoke with one voice last year in passing H.R. 1088. As a member of the Senate Appropriations Committee, I will fight for these resources so we can have a strong and effective SEC to protect our capital markets.
Another important avenue for accomplishing this goal is through constructive and targeted legislative reforms.
I am proud to join with Senators Dodd, Corzine, Stabenow and others in cosponsoring a bill to address the problems that have become evident in audit and accounting practices at publicly traded firms. S. 2004, the Investor Confidence in Public Accounting Act of 2002, tackles these problems by creating a framework to give investors access to transparent, accurate and unbiased financial information, crucial ingredients for the proper functioning of our free market economy.
The bill provides improved oversight of the auditing profession by establishing an independent regulatory organization that would be responsible for establishing audit standards, maintaining proper quality control oversight, and ensuring proper enforcement of violations. S. 2004 would also designate a fully independent organization to set generally accepted accounting principles. In addition, the bill clarifies auditor independence standards and provides for greater transparency in financial disclosures.
I would note, however, that these provisions should not materially affect small accounting firms or businesses that rely small accounting firms. Since the bill pertains primarily to accounting firms that conduct work for publicly traded businesses, small businesses will be largely unaffected. I continue to be very concerned about the effect that any piece of legislation would have on small, Main Street businesses. I will continue to work to ensure that any legislation of this type protects the ability of small firms to compete in the marketplace.
I thank Chairman Pitt for his extensive and thoughtful written testimony, and I once again thank you, Mr. Chairman, for scheduling this hearing.