Tweedie and Volcker testify to US Congress

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15 Feb 2002

IASB Chairman Sir David Tweedie and IASC Foundation Chairman Paul Volcker testified at a hearing conducted by the US Senate Committee on Banking, Housing, and Urban Affairs on 14 February 2002 on "Accounting and Investor Protection Issues Raised by Enron and Other Public Companies: International Accounting Standards and Necessary Reforms to Improve Financial Reporting". Excerpts from Sir David's statement. Click for Full Text (PDF 108k): I do not plan to comment on specific accounting and auditing issues surrounding Enron, although there are many.

None of us knows enough about the specifics of the transactions, the information available to the auditors, and the judgements involved to form a solid professional conclusion. As we learn more, we may find the U.S. accounting standards should be improved. If so, we plan to learn from this case and to make sure that international accounting standards do not have similar problems....

Why have an international standard setter?

  • First, there is a recognised and growing need for international accounting standards.
  • Second, no individual standard setter has a monopoly on the best solutions to accounting problems.
  • Third, no national standard setter is in a position to set accounting standards that can gain acceptance around the world.
  • Lastly, there are many areas of financial reporting in which a national standard setter finds it difficult to act alone.

Excerpts from Mr. Volcker's statement. Click for Full Text (PDF 39k):

We have had too many restatements of earnings, too many doubts about 'pro forma' earnings, too many sudden charges of billions of dollars to 'good will', too many perceived auditing failures accompanying bankruptcies to make us at all comfortable. To the contrary, it has become clear that some fundamental changes and reforms will be required to provide assurance that our financial reporting will be accurate, transparent, and meaningful....

I think of good financial reporting as resting on three pillars:

  • Accounting standards setting out with clarity logically consistent and comprehensive 'rules of the game' that reasonably reflect underlying economic reality.
  • Accounting and auditing practices and policies able to translate those standards into accurate, understandable, and timely reports by individual public companies.
  • A legislative and regulatory framework capable of providing and maintaining needed discipline.

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