Minnesota needs more accounting regulation

As Americans look back on Sept. 11 and realize our country will never be the same, they look to prevent similar future attacks and justify going to great lengths to attain this goal. The war on terror, strict airline safety and immigration laws and a surge of patriotism are all seen as essential to the majority of Americans.

Overlooked in the frenzy is the equally, if not more, important task of preventing another Enron. Fortunately, Minnesota Attorney General Mike Hatch and the state Senate have not forgotten and are working on a bill that would act as a safeguard against a similar disaster in Minnesota.

Bill S.F. 3016, introduced to the Senate and referred to the Commerce Committee on Monday, would prevent CPAs who provide accounting services from providing consulting services for the same company. The bill, authored by Sen. Doug Johnson, DFL-Tower, focuses on safeguarding Minnesota from Enron-style fraud, limiting conflicts of interest that arise when CPAs have a vested interest in the company’s audit.

Some people, however, do not view the bill as being appropriately effective. Scott Nelson from the Minnesota Society of Certified Public Accountants argued against it, citing the competitive disadvantage at which it puts CPAs in Minnesota, suggesting instead that reform at the federal level, where all CPAs would be subject to the same rules, is more appropriate.

The fears of Minnesota CPAs are not entirely unjustified; whenever new regulations are enacted, those restricted might lose business to those not yet following similar rules. However this is a risk Minnesotans and CPAs must face, and is one which both have conceded as necessary.

Said Hatch, “People in the state want something done,” and Nelson also admitted the significance of reform. Minnesotans have no desire to have an Enron recurrence here – with the job losses and financial ruin it would entail – and it is not satisfactory to wait for the federal government to take action.

The stipulations of the bill are reasonable, and it is likely other states will adopt similar measures. In an ideal world, conflicts of interest would be irrelevant and CPAs infallible, but the state must be realistic; if accountants at the highest echelon of business can fall prey to temptations, it can happen here.

Many accountants and financial experts attest that in the long run Enron will have a more far-reaching impact on the economy and the country than even Sept. 11. In light of such testimony, bills aimed at curbing Enron-style corruption share equal import with domestic security and the war on terror. Beyond direct implications of stopping corruption, the legislation of S.F. 3016 exhibits to Minnesotans that something is being done to safeguard their finances and helps restore a bruised faith in securities.