DENVER—The state of
Colorado must do more to protect investors from corporate accounting fraud in
order to restore the investing public's faith in the stock market, according
to a new report released today by the Colorado Public Interest Research Group
(CoPIRG). The report entitled, "It's
Our Business: How Colorado Can Reclaim Investment from Corporate Accounting
Fraud," also contains policy recommendations.
"A misconception exists
that corporate scandals are solely federal issues—they're not," said
Nicole A. Boojamra, CoPIRG consumer attorney. "The state of Colorado needs
to be more proactive and enact stricter requirements dealing with the licensing
and regulation of accountants and the conflicts of interest they may face,"
Boojamra continued. "Accountants, in their 'public watchdog' capacity could
have prevented the collapse of Enron and WorldCom, and the restatements at Qwest
that cost investors billions-their retirement funds, and their kids' college
savings," Boojamra added.
In recent years, the number
of earnings restatements issued by corporations have increased 145 percent.
The Colorado Board of Accountancy, which regulates accountants, needs to implement
new policies and procedures to reassure the investing public that the information
on which they are basing their investing decisions is truthful and accurately
reflects the financial health of a company.
Some of CoPIRG's state-level
policy recommendations for the corporate accounting crisis include:
• Increasing the number
of ethics hours accountants must complete as part of their continuing professional
education (CPE), and implement periodic ethics testing. Currently accountants
must complete 80 hours of CPE every two years only two of those hours are on
the subject of ethics.
• Implementing a peer review
or quality review process for reviewing an accountant or accounting firm's auditing
practices, as a condition to license renewal.
• Requiring auditors to
sufficiently document their work so that a reviewer with relevant knowledge
and experience, but no previous knowledge of the audit, can understand the conclusions
reached.
• Granting the Board of
Accountancy full access to all accounting documents (not just the auditor's
work papers)—including pertinent documents from the company that is being
investigated.
CoPIRG is a non-profit,
non-partisan organization dedicated to consumer and democracy issues in Colorado.
