Elizabeth Dole Applauds Senate Approval of Corporate Accountability Bill; Urges More to Change Incentives for Auditors
Contact: Mary Brown Brewer
Monday, July 15, 2002
Salisbury, NC – U.S. Senate candidate Elizabeth Dole expressed support for the accounting oversight bill passed by the Senate today. Calling the measure a good step toward restoring investor confidence, Mrs. Dole emphasized that more should be done to change the incentive structure for auditing companies:
• “This bill helps expose and punish corporate corruption, improve disclosure, and increase protections for those who invest, including pension funds. But we need to do more: Auditors need to be held more accountable and there needs to be more independence from the companies they report on.”
• Dole said we must do more to instill confidence in our system by looking to innovative solutions like an idea put forward by New York University Stern School of Business accounting professor Joshua Ronen, who proposes that companies buy financial statement insurance in much the same way they now buy officers and directors insurance: “It’s a matter of changing the incentives,” said Dole. “Right now the auditor is hired by a corporation. But if corporations are required to buy financial statement insurance, and the insurer hires the auditor, it changes the incentive.”
• “The insurance company has every incentive to hire the most competent auditor, and the auditor has every reason to ensure an accurate audit. Under such a system, the loyalty is to accuracy, not to the corporation being audited.”
• “On corporate boards, directors rely on auditors to get the information they need to make informed decisions, and those that refuse to play by the rules threaten to undermine the integrity of our financial markets. We need a higher standard of ethics, more accountability, and tougher penalties for wrongdoing.”
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