Is the SEC Going Soft on Credit Rating Agencies?
By Kreag Danvers and B. Anthony Billings Auditors were the first to be besieged by Congress and the SEC for conflicts of interest and lack of independence in the Enron failure. Enron’s collapse questioned the effectiveness of audits and challenged accounting firms’ practices, including the purported effects of consulting services on independence. A major outcome of this scrutiny was the Sarbanes-Oxley Act of 2002, which prohibits audit firms from providing certain types of consulting services and created the Public Company Accounting Oversight Board (PCAOB) to oversee auditors of publicly traded firms. Next came the brokerage and investment banking houses, rife with conflicts of interest from buy-side analysts promoting stocks in order to maintain lucrative investment-banking fees. In April 2003, federal and state regulators reached a settlement with the big Wall Street investment firms that is expected to improve analyst independence as research is separated from investment-banking ac
