Michele Norris talks with Lynn Turner, former chief accountant of the Securities and Exchange Commission, about the accounting industry in a post- Sarbanes Oxley and Arthur Andersen accounting fraud world. Turner is currently the managing director of research at Glass, Lewis & Co, a financial research firm.
MICHELE NORRIS, host: The Arthur Andersen document-shredding case, along with other      high-profile bookkeeping scandals, ushered in an era of new rules and      federal oversight in the accounting industry.  To help us better      understand how the industry has changed, we turn to Lynn Turner.  He's a      former chief accountant at the Securities and Exchange Commission.</s>MICHELE NORRIS, host: Thanks for being with us.</s>Mr. LYNN TURNER (Former Chief Accountant, Securities and Exchange      Commission): It is great to be here today with you.</s>MICHELE NORRIS, host: First, Arthur Andersen, the firm and its role in destroying      Enron-related documents--was this seen as an isolated case or did the      investigation and the eventual conviction have an immediate impact on the      industry?</s>Mr. LYNN TURNER (Former Chief Accountant, Securities and Exchange      Commission): The impact of the document shredding that showed up all over      the front pages of all the major newspapers, I think, did have a direct      impact on the accounting profession.  And, of course, it certainly had an      impact on the subsequent legislation that got passed such that those type      of events, hopefully, would not occur again today.</s>MICHELE NORRIS, host: You're speaking of the Sarbanes-Oxley legislation.  Explain to      us the law and its impact on the industry.</s>Mr. LYNN TURNER (Former Chief Accountant, Securities and Exchange      Commission): Sarbanes-Oxley was legislation passed by Congress in the      summer of 2002 and then signed by President Bush.  In it, about half of      the language deals with setting up a new regulator for the accounting      profession called the Public Companies Accounting Oversight Board that      oversees the audit firms. The rest of the legislation deals with some      important things like ensuring that management is held accountable for      the financial reports that they file with the SEC.  It improves the      independence of corporate boards, as well as the independence of the      auditors, and it increased some of the penalties for those who shred      documents or violate the security laws.</s>MICHELE NORRIS, host: There was a long of hand-wringing within the industry while this      legislation was under discussion on the Hill.  What's happened now, since      the law's gone into effect?</s>Mr. LYNN TURNER (Former Chief Accountant, Securities and Exchange      Commission): We really are starting to see much better audits performed      than what we used to see.  Errors in the books get caught much quicker,      such that the investors aren't given the surprises that they were in the      case of Enron and WorldCom and Qwest and the like.</s>MICHELE NORRIS, host: Has there been a question about enforcement?  You know, who's      actually doing the oversight now?</s>Mr. LYNN TURNER (Former Chief Accountant, Securities and Exchange      Commission): With respect to the audit firms, it's very clear that the      Public Companies Accounting Oversight Board has the role of enforcement,      albeit the SEC is still playing the major cop on the beat.  On the      company side, I think all the law enforcement agencies, running from the      Justice Department to the SEC to the state attorney generals, such as      Galvin in Massachusetts and, of course, Spitzer in New York, are all      playing very key and very important roles in protecting investors.</s>MICHELE NORRIS, host: You know, changes like this that we're talking about in the      industry--does this largely impact the corporate world, or does this in      some ways touch the lives of ordinary Americans, folks like you and me?      And if it does, how so?</s>Mr. LYNN TURNER (Former Chief Accountant, Securities and Exchange      Commission): I think the scandals have touched many Americans.  There are      90 million Americans who have put their money in the capital markets and      have invested there through their 401(k)s or IRA accounts.  So the frauds      and the loss in market value of some $9 trillion certainly affected      everyone.  In terms of the regulation and reforms, as the numbers get      better you can have more confidence in those numbers.  You can get better      stock information, better stock prices.  And, hopefully, you won't see      your savings disappear like they did in the summer of 2002 as everyone      watched their 401(k) accounts just plummet in value.  So I think the      investor safeguards that have been put in place are impacting everyone      today, especially as we start to talk about the greater use of private      accounts and expansion of some of these retirement programs.</s>MICHELE NORRIS, host: Lynn Turner, thanks for talking to us.</s>Mr. LYNN TURNER (Former Chief Accountant, Securities and Exchange      Commission): Thank you for inviting me.</s>MICHELE NORRIS, host: Lynn Turner, managing director of the financial research firm      called Glass, Lewis & Company.  He's also the former chief accountant at      the Securities and Exchange Commission.