Enron: The Impact on Auditing Practices
James C. Kokolas, CPA
Partner
Thomas Havey LLP

Expect many regulatory and legislative changes for what has been, up to now, a largely self-regulated accounting profession. That’s the prediction by CPA Jim Kokolas, who discussed how the Enron/Arthur Anderson situation will influence state and federal government attention on auditing practices.

Congress is considering numerous solutions, Kokolas reported, following a series of hearings investigating Enron and Arthur Anderson. New audit guidelines to detect fraud will likely be mandated in the very near future, he said.

There are more than 30 Enron-related bills being considered, Kokolas said. They contain proposals on various aspects of accounting, ranging from limiting non-auditing services, requiring companies to change auditors every few years, stipulating the retention period for paperwork standards and imposing a waiting period before accountants could go to work for their clients. New York State is considering more targeted legislation that would prohibit Arthur Anderson from auditing any functions within the state government.

Kokolas said the short-term challenge is to modernize the reporting function. As legislators and regulators consider this issue, he predicts the results will include new limits, if not outright restrictions, on non-auditing activities as well as changes in executive compensation policies as they relate to stock options.

During Kokolas’ 18-year career he has focused on accounting auditing within the public accounting sector. He specializes in employee benefit funds and other not-for-profit entities, with a concentration in defined benefit pension funds. He received a BS in accounting from the University of Maryland.