SEC on the warpath over Enron

US watchdog the Securities and Exchange Commission (SEC) has called for a new framework to monitor and regulate accounting firms in the US in the wake of the Enron scandal.

While Enron's seems to be an extreme case, financial reporting at hi-tech companies - and subsequent approval by accountants - has come in for increasing scrutiny.

SEC chairman Harvey Pitt said: "This commission cannot and will not tolerate a pattern of growing restatements, audit failures, corporate failures and massive investor losses.

"Somehow we have got to put a stop to the vicious cycle that has now been in evidence for far too many years."

The comments were prompted by the collapse of energy trader Enron and the scrutiny of its auditor, Andersen, which either failed to discover or disclose problems with Enron's books.

Pitt said that he and others at the SEC were still trying to work out the details of the new framework that will be dominated by public members with two primary components: discipline and quality control.

He explained that the SEC will work with the American Institute of Certified Public Accountants to form a new industry-policing group, under the SEC, that would toughen auditor oversight.

The new process would replace the current peer review with more frequent monitoring of audit quality and competence, and should include a permanent quality control staff made up of knowledgeable people unaffiliated with any accounting firm.