A Treasury Department panel issued final recommendations on Friday meant to encourage auditing firms to catch corporate fraud before it happens — and to protect them from going under when it does.
But the nonbinding recommendations, from the agency’s advisory committee on the auditing profession, did not suggest that auditing firms be insulated from lawsuits stemming from their work for clients who engage in fraudulent activities — a hotly debated issue in the profession.
Arthur Andersen, once one of the nation’s largest auditors, went out of business in 2002 after having approved the books of Enron, the energy giant that collapsed because of fraud. Since then, the profession has worried that there are too few large firms left to monitor the books of corporate America. Four large firms, known as the Big Four, now combine auditing and accounting services.
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