The recent tidal wave of corporate crimes and scandals has done severe damage not only to our economy but also to the reputation and functioning of the accounting profession. We are joined today by eminent accounting professors and professionals to announce a new effort to restore integrity and responsibility to the profession.

In the last five years, there have been 919 earnings restatements at 845 public companies. In 2002 alone, there were restatements at 330 companies, a new record. The Government Accounting Office estimates that restatements have cost investors $100 billion. A total of 186 public companies with $368 billion in debt filed for bankruptcy protection in 2002, shattering the record for a second straight year.

Today, more than half of American households own stock. When companies lie about their finances, millions of Americans and their pensions are victimized, our markets fail to function effectively, and our entire economy suffers.

Accountants are supposed to be a major bulwark against this rampant fraud. But, as should be abundantly clear by now, accounting firms not only didn't stand up to corporations that were deceiving the public, in many cases they were the architects of the fraud. Seduced by the promise of easy money, accounting firms time and again cozied up to their corporate clients.

Every one of the Big Five accounting firms failed to alert the public of major fraud. Andersen signed off on both Enron and WorldCom's books. Deloitte and Touche signed off on Adelphia's books. Ernst & Young signed off on AOL Time Warner's books. PricewaterhouseCoopers signed off on finances at Lucent, which just last week settled with the SEC on a $679 million restatement. The SEC has charged KPMG with fraud for its role in helping Xerox overstate profits by $1.2 billion. Clearly, this is an epidemic. Perhaps the most glaring problem is that auditors are not independent. According to the Wall Street Journal, even in September, after selling off their consulting arms, auditing firms still were getting more than 50% of their revenue from non-auditing services. The Securities and Exchange Commission has since taken some steps toward promoting independence by banning a number of non-audit services, in accordance with the much-vaunted Sarbanes-Oxley Act. However, as long as accountants must "police the very companies that pay their fees," as Business Week put it, the audit will be inherently compromised.

In its recent rule-making on auditor independence, the SEC notably declined to ban auditors from performing tax planning services. Why? Because big tax-planning services are a lucrative and growing business for the big accounting firms, who heavily lobbied the SEC as not to impede their profits. If you look at the comments the SEC received on this issue, the majority were in favor of allowing auditors to perform tax planning services. That's because there are too few public interest voices in the accounting industry.

Just a few weeks after the SEC caved to the big firms on the tax-planning rule, the Joint Committee on Taxation released a 2,700-page report that documents how Enron used tax shelters to avoid paying taxes on more than $2 billion and not pay anything at all in four out of five years. This report revealed the key role that accounting firms had in crafting this fraud. For example, Enron paid accounting firm Deloitte & Touche $16.3 million for tax shelter consulting. All told, Enron spent $88 million on tax shelter services. Half a million of that, by the way, went to Arthur Andersen. Think about that - these are accounting firms, whose job it is to keep the company honest, who at the same time are making millions in consulting fees to help companies bend or maybe break the laws. Hardly a portrait of integrity.

One of Enron's most lucrative accounting tricks was taking advantage of the tax treatment of stock options, which under current rules can be counted as an expense for tax purposes but don't need to be counted as an expense in financial statements. That means, for example, that in 2000 Enron deducted $1.6 billion for stock option grants, but never told investors. More than $1.4 billion of those options went to just 200 top executives, who got very rich at the expense of unwitting investors.

Having all those options, as we now know, inspired top executives to engage in all kinds of fraud to keep the stock price high so they could cash out big, leaving workers and pensioners holding the bag when the stock inevitably tanked. It was the same story at countless other companies: Top executives got big stock option grants, pulled all kinds of accounting tricks so they could cash out, and left helpless investors with billions in losses. The Financial Times reported last year that executives at the top 25 bankruptcies since 2001 made off with $3.3 billion. Gary Winnick, the Global Crossing chairman, sold $735 million in stock as his company spiraled into bankruptcy. AOL Time Warner chairman Steve Case sold $475 million as his company's stock fell hard; Cisco CEO John Chambers sold $239 million as his company's stock plummeted. As Fortune magazine documented, at 1,035 major corporations where stock price fell by 75% or more, executives cashed out on $66 billion worth of stock. About $23 billion of that went to 466 insiders at just 25 corporations.

But stock options, the steroids of corporate greed, are not only still legal, they still don't even have to be expensed. That means investors are still being deceived, the IRS is still being cheated, and executives are still getting ridiculously rich and given every incentive to lie to keep the stock high. It was a formula for financial ruin the first time around, it's still a formula for financial ruin.

Of course, we have been given assurances that our leaders are serious about cleaning up this mess that in many ways they helped to create by not properly watching over the accounting industry. In fact, they've even created a new board to keep tabs on the accounting industry as part of the Sarbanes-Oxley Act - the Public Company Accounting Oversight Board. But after just a few meetings, this supposed industry watchdog board looks like it needs its own watchdog. In its very first meeting, members voted themselves annual salaries of $452,000 apiece, and $560,000 for their chairman. The President of the United States, by comparison, makes $400,000. Cabinet members earn $171,900; Federal Reserve Board Chairman Alan Greenspan earns $166,700; the chairman of the Securities and Exchange Commission earns $142,500. This salary level is a contagious precedent.

But while board members have shown themselves capable of the same infectious greed that has wreaked havoc on our economy, they've so far not taken any notable actions to restore integrity to the accounting profession.

Over at the Securities and Exchange Commission, we've been given the same promises about "a new climate of confidence" now that longtime Bush family friend and Wall Street insider William Donaldson has replaced Harvey Pitt. It's too early to tell whether Donaldson can rise to the challenge. But without significant pressure from the public interest community, it's unlikely he'll turn against his old friends.

Donaldson already has one strike against him - he's the head of an agency that has been chronically underfunded and lacks the resources to effectively unravel many of the complicated accounting frauds plaguing the economy. President Bush has promised an $841 million budget for the SEC in 2004, almost double the budget from last year. But like many Bush promises, it's far enough in the future that it will do little to help the present situation and only constant watchdog pressure will keep it from being forgotten. Bush already tried to stiff the SEC last year, recommending only $568 million in funding even though the Sarbanes-Oxley Act, which he signed, called for $776 million. This issue is key. As the Government Accounting Office concluded in a report on SEC funding, "[T]hese delays have resulted in foregone revenue and have hampered market innovation."

The SEC also needs to get serious when it comes to enforcement and cracking down on corporate crime. Unbelievably, the SEC settled with WorldCom, responsible for the largest financial fraud ever, without even a fine. What kind of example does this set if WorldCom, which restated its earnings by more than $9 billion, gets off without a fine? We will be watching closely to see what happens with KPMG, which the SEC has charged with fraud for helping Xerox improperly inflate its profits by more than $1.2 billion.

Another positive step the SEC could take is to expand disclosure. After all, the SEC was founded to make our capital markets work fairly by making sure the public had good information about corporations. But right now the public is lacking significant information about corporations in a number of areas, including environmental and social liabilities. Even though public companies give very different profit pictures to the IRS and to the investing public, the public has no access to the tax returns of public companies. IRS estimates put the gap between tax return profits and financial statement profits in 1998 at $159 billion, up from $92.5 billion just two years earlier.

We know that the health and justice of our economy depends on good, accurate information. And we know that the role of accountants is to make sure that the information is indeed good and accurate. Unfortunately, too many accountants, blinded by greed and corporate pressures, seem to have forgotten that this is their role. For too long, the public interest voices in the accounting industry have been overwhelmed by corporate pressures. Today, we are pleased to introduce a new public interest voice to restore integrity to the accounting profession, to remind the profession of its public interest duty, and to make sure that we can all benefit from their work honestly and well done, no matter how large, how powerful and how demanding their corporate clients.

And now, to discuss the state of the profession and the new association further are Tony Tinker and Linda Ruchala.