<p>WASHINGTON – A major overhaul of the relationship between companies and the firms they hire to conduct their audits is needed to ensure that investors are getting accurate pictures of financial health, the Consumer Federation of America (CFA) recently said. The CFA outlined recommendations that do away with conflicts of interests and increase regulatory oversight. "The Enron scandal proves conclusively that a top to bottom overhaul of the system is needed if we are going to bring light out of this darkness," said CFA Chairman Sen. Howard Metzenabum (ret.). "Half measures and quick fixes won't do the job. We call upon Congress to see to it that never again in America's corporate history is there a repeat of such a situation." The CFA white paper outlined six reasons that safeguards failed to ensure accurate financial disclosures by Enron: Arthur Anderson "had a conflict of interest" with Enron because it received "millions of dollars" in audit and non-audit fees; "no effective regulatory oversight" of auditors who face "little threat of sanctions when they fail to live up to their professional responsibilities;" the Private Securities Litigation Reform Act of 1995 "greatly reduced auditors liability and, with it, their incentive to prevent fraud;" the SEC has "inadequate resources to conduct regular, thorough reviews of the financial statements to public companies;" Enron's corporate board "failed to provide effective oversight" of Arthur Anderson;" "accounting rules permit companies to present a misleading picture of their financial health." "The dramatic collapse of Enron has exposed appalling gaps in safeguards designed to protect investors," said Barbara Roper, CFA's director of investor protection and author of the report. She called on Congress to "act quickly and decisively to enact strong structural protections to restore investor confidence in the integrity of our financial marketplace." Specifically, CFA recommends Congress: place a ban on auditors providing non-audit services to audit clients, mandatory periodic rotation of auditors and a cooling off period before they can go to work for audit clients; enhance the Securities Exchange Commission for auditor oversight or create a self-regulatory organization with rule-making, investigative and enforcement authority; allow legal liability towards auditors who abuse the public trust; strengthen the stock exchanges "watered down" independence standards for board members and require that a majority of those members and all audit committee members meet those standards. increase SEC funding that would allow regular, in-depth reviews of the financial statements filed by public comments; improve accounting rules that would prohibit excessive debt in "special purpose" entities and other "off-balance-sheet transactions." -</p> <p>[email protected]</p>