Securities and Exchange Commission Chairman Harvey Pitt Tuesday urged accountants to interpret accounting standards more thoughtfully, and recommended greater SEC oversight of the Financial Accounting Standards Board. "Present-day accounting standards are cumbersome and offer far too detailed prescriptive requirements for companies and their accountants to follow," said Pitt in a speech before federal judges and lawyers in Puerto Rico. "That approach, by necessity, encourages accountants to 'check the boxes' -- that is, to read accounting principles narrowly, to ascertain whether there is technical compliance with applicable accounting principles." Instead, literal interpretations of accounting standards should be second to interpretations based upon the spirit or principles behind accounting laws, Pitt said. The accounting profession has recently come under intense scrutiny in light of Arthur Andersen's role in Enron debacle and Pitt has made revamping bookkeeping and disclosure standards a top priority. In his speech, Pitt also urged that the SEC be allowed a more "active and aggressive oversight role" over FASB, with greater influence on its agenda and the amount of time it is allowed to address critical subjects. Some have criticized FASB for taking more than 10 years to address accounting for the kinds of partnerships that led to Enron's downfall. Among other initiatives aimed at improving and modernizing the information disclosure and regulatory system, Pitt said that public companies should be required to "identify the most critical accounting principles upon which a company's financial status depends, and which involve the most complex, subjective, or ambiguous assessments." The SEC chief also suggested that corporate executives be held to more rigorous standards. He has recommended that Financial Executives International, FEI, tighten its models of conduct for corporate directors and has asked the NYSE and Nasdaq to review their listing agreements, "to see whether new obligations for corporate officers and directors can be articulated to enhance the security investors feel, and the reliance they place, on corporate oversight." In mid-January, Pitt proposed the
creation of an independent panel that would oversee the accounting industry and set professional and ethical standards. He reiterated that call in Tuesday's speech.