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US House approves accounting regulatory and disclosure legislation

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25 Apr 2002

The US House of Representatives has approved a bill that would create a regulatory board under the direct authority of the US Securities and Exchange Commission to certify auditors of publicly traded companies.

The Board would have the power to impose sanctions for auditor misconduct. The bill would bar accounting firms from doing certain financial-systems consulting and internal auditing for audit clients. The bill would require "real-time disclosure" of insider transactions. And it would require disclosure of:

  • "the issuer's off-balance sheet transactions and relationships with unconsolidated entities or other persons, to the extent they are not disclosed in the financial statements and are reasonably likely to materially affect the liquidity or the availability of, or requirements for, capital resources, or the financial condition or results of operations of the issuer;" and
  • loans to officers, directors, and other insiders. The Senate is considering a similar but not identical bill. Joint approval of the legislation is required.

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