note: Dr. D. R. Carmichael, CPA, is vice president -- auditing of
the American Institute of Certified Public Accountants and directs
the organization's Auditing Standards Board. Prior to his appointment
in 1978, he served the AICPA as its vice president -- technical
services. Before that he was managing director -- technical services,
director of the auditing standards division, director of the research
division, and editor of the accounting and auditing column of The
Journal of Accountancy.
Numerous articles by Dr. Carmichael have appeared
in professional periodicals, and he is co-author of two widely used
college texts on auditing -- Auditing Concepts and Methods
and Perspectives in Auditing. He is also author of the first
auditing research monograph published by the AICPA -- The Auditor's
Reporting Obligation, a co-editor of the book on the third Seaview
Symposium -- Corporate Financial Reporting: The Benefits and
Problems of Disclosure, and the principal writer and editor
of the report of the commission on auditors' responsibilities.
He has served on the faculties of the University
of Texas at Austin, the University of Illinois, Columbia University,
New York University, and Baruch College and has acted as a consultant
to public accounting firms.]
How would you feel if you could be fined or jailed because your checkbook
didn't balance -- even if you didn't write a bad check? Or how would
you feel if you could be fined or jailed even if your checkbook was
in balance, but you failed to reconcile it monthly? Believe it or
not, that is the position of all public companies subject to the Securities
Exchange Act of 1934. What was once considered prudent business practice
is now the law of the land; the Foreign Corrupt Practices Act is that
The FCPA has been in effect for over three years, and it has two
main parts. The first part makes it unlawful to bribe foreign officials
or politicians to get or to keep business. This part is administered
by the Department of Justice and covers all U.S. companies. Its subject,
"anti-bribery," is what you would expect from the title
of the law.
The other part, which the law calls the "accounting standards,"
establishes requirements for accurate accounting records and sound
internal accounting control. These requirements apply to domestic
as well as foreign transactions and locations but only to public companies
subject to the 1934 act, and they are administered by the Securities
and Exchange Commission. The fact that the law applies to both domestic
and foreign transactions has caused some observers to label the act's
title as "very misleading." And, perhaps even more significant,
no bribe (foreign or domestic) has to be involved for the SEC to invoke
this part of the law.
My thesis is that the FCPA's origin has many parallels with the passage
of the federal securities acts in 1933 and 1934 and that the SEC's
administration of the securities acts provides important insights
into the implications of the FCPA for business, society and public
Passage of the securities acts -- a parallel
On Tuesday, October 29, 1929, the bubble burst on Wall Street. Over
16 million shares were traded on the New York Stock Exchange. This
resulted in a loss in share value of over $10 billion -- twice the
amount of currency in circulation in the whole country. It was the
culmination of a financial disaster estimated to have resulted in
losses of $50 billion. A worldwide depression followed.
The scandal resulted in the passage of the federal securities acts,
but the form of the legislation with its emphasis on financial disclosure
and audited financial statements had little to do with the causes
of the crash. Speculative fever gripped the nation. Everyone borrowed
to the hilt to buy stock. Unscrupulous traders formed pools designed
to manipulate the price of stock.
In a recent popular book giving a full history of the crash, The
Day the Bubble Burst, by British reporters Gordon Thomas and Max
Morgan-Witts, there isn't a single mention of false or misleading
financial statements. (1)
Indeed, there is little evidence that financial statements published
before passage of the securities acts were fraudulent or misleading
or that required disclosure has made them more useful to investors.
According to George Benston, a professor at the University of Rochester,
in 1929, stocks of 100 companies on the NYSE were manipulated by pools.
All 100 companies published financial statements for at least two
years before the crash with better than average disclosure.
The hearings on the securities acts actually produced only two
revelations of deceptive or dishonest financial reporting. Yet the
common opinion today is that the securities acts were needed to correct
abuses in financial reporting and that poor disclosure or lack of
auditing were big contributors to the stock market crash. The legislative
response to the newspaper reports of scandals and the general public's
demand to "do something" were shaped largely by special
interest groups' demands of investment bankers and reformers rather
than by objective analysis.
Passage of the FCPA -- history repeats itself
The FCPA also resulted from a public scandal, and the specific form
of the legislation is also at variance with the causes of the scandal.
Nearly 450 companies -- including some of the biggest in the country-
are known to have made kickbacks, bribes or other questionable payoffs.
The so-called culprits range from Bell Helicopter, a subsidiary of
Textron, Inc., to giant oil companies such as Gulf Oil Corporation
and Exxon Corporation. The litany of corporate misdeeds reported daily
in the press shocked the public and toppled two foreign heads of state.
Some secret payments were recorded and inadequately described; others
were made from off-the-books funds set up for that purpose. A tire
manufacturer listed payments as CDs for "crooked deals."
In all but a few cases, however, payments were authorized by an official
acting within normal pre-scandal authority. In certain fields -- transportation,
liquor and military sales-payoffs had been common for years. Thus,
the payoffs were not the result of poor internal control. No system
of internal control -- no matter how well-designed and policed --
can prevent misjudgment or immorality on the part of an officer with
authority to approve transactions. Yet the conventional idea has developed
that "the proven inadequacy of systems of internal control"
or "accounting gimmicks" were significant factors in corporate
Thus, there was a public scandal and Congress was under pressure
to take action. The FCPA was the legislative solution to the problem.
The prohibition of bribery was responsive to this problem, but the
"accounting standards" were a special-interest addition.
The special-interest group was the SEC. It asked to have an existing
rule-making proposal of its own incorporated in the FCPA.
The internal accounting control provision
The focus of the accounting standards in the FCPA -- internal accounting
control -- is largely an invention of accountants and auditors. Management
has many objectives in operating a business and establishes controls
to ensure that results meet those objectives. Management has no independent
need to classify controls and has difficulty separating internal control
from managing a business. Classification of one group of controls
separate from the other controls needed for the orderly and efficient
conduct of business was the idea of accountants and auditors.
Controls can be classified in many useful ways. Auditing literature
combines classification by objectives (such as safeguarding assets)
with classification by jurisdiction (accounting vs. administrative
controls). Note that it is a combination and not exclusively jurisdictional.
Accounting controls are not confined to the accounting department.
The FCPA adopts the definition of accounting control in the auditing
literature. The broad objectives are asset safeguarding and reliable
accounting records. More detailed objectives concern: (a) transaction
authorization; (b) transaction recording; (c) restricted access to
assets; and (d) accountability comparisons of asset counts to records.
Since this definition of internal accounting control is adopted in
the law, the distinctions made by accountants may determine whether
an action is a poor business judgment or an illegal act. However,
it is often difficult to separate accounting controls from other controls.
The complexity of the classifications can be illustrated by considering
the objective of safeguarding inventory. Internal accounting control
protects against unintentional exposure to risk. Determining the intentional
exposure is a business policy decision. Setting the acceptable level
of inventory shrinkage is a management judgment and a matter of administrative
control. Comparing actual to planned shrinkage is an accounting control.
Establishing a budget is an administrative control; using the budget
to detect variation from plans achieves an accounting control objective.
Auditors are not concerned with whether inventory shrinkage should
be 2 percent, 4 percent or 6 percent. They are concerned with whether
the system will promptly detect shrinkage that exceeds the established
level. These distinctions, however, may be overlooked by non-accountants.
Auditor involvement -- a short history
Auditors have flirted with expressing an opinion on the "adequacy"
of a system of internal accounting control for years. The CPA Handbook,
issued by the American Institute of Accountants shortly after World
War II, discussed an auditor's responsibility to include a judgment
on a system in the opinion on financial statements if it was determined
that the system was "poor."
The feasibility and desirability of expressing an opinion on a system
of internal control were debated among accountants in the following
years. The feasibility of expressing an opinion on the "adequacy"
of a system was seriously questioned. There is no formula to determine
the adequacy of a system. Also, auditors knew the link between inadequate
controls and modification of audit procedures was poor. Desirability
was also questioned because users might easily misunderstand the Significance
of an opinion. Every system has inherent limitations; no system is
The last serious look at the topic before the current interest generated
by the FCPA was during the late 1960s. Statement on Auditing Procedure
no. 49, Reports on Internal Control, made issuance of reports
on internal control a management option, but the report form was so
hedged to avoid user misunderstanding that it was a triumph of precision
over comprehension. SAP no. 54, The Auditor's Study and Evaluation
of Internal Control, stimulated a reexamination of the audit process
in CPA firms that resulted in current firm materials that needed only
slight retooling for use by clients in adopting programs to comply
with the FCPA. The key is a systematic approach to evaluation that
depends on comparing control procedures to control objectives by class
of transaction or asset. If procedures won't provide assurance of
achieving the objectives, there is a weakness. How to decide whether
the weakness precludes sufficient assurance is a current debate. Statement
on Auditing Standards no. 20, Required Communication of Material
Weaknesses in Internal Accounting Control, was either a holding
action or one shoe being dropped depending on your viewpoint. It acknowledged
an obligation to communicate material weaknesses to senior management.
It also pledged a continuing study of expressing an opinion on a system
of internal control.
Internal control is an integral part of the management of a corporation,
and internal accounting control is a difficult to define part of it.
Thus, the FCPA provides the SEC with authority over important aspects
of corporate management activity. Auditors have long been associated
with internal accounting control and have given serious consideration
to publicly reporting on the condition of a control system. Thus,
the SEC can be expected to involve auditors in its administration
of the FCPA.
SEC administration of the FCPA
The SEC's administration of the securities acts -- including the
FCPA -- involves both enforcement and rule-making. In pursuing administration
of the FCPA, the SEC will be interested in ensuring that no major
scandal similar to the illegal payments scandal recurs and using the
FCPA to achieve other goals that will prevent or reduce management
violations of fiduciary responsibility. The SEC receives no benefits
from taking risks. If it can avoid a serious fraud or scandal by imposing
rules, its benefits will exceed its costs. (The SEC is serious about
this even though auditors and corporate executives warn that the FCPA
accounting provisions cannot guarantee this result.)
In enforcement actions, the SEC has already demonstrated the flexibility
of the FCPA to reach any violation of management's fiduciary responsibility.
The FCPA has been invoked in court actions involving diversion of
corporate assets with no hint of foreign bribery. The Aminex case
involved charges of falsified accounting records and weaknesses in
internal accounting control. The Wyoming Coal case also involved
violations of both aspects of the accounting provisions but no bribery.
These cases demonstrate that the law that resulted from foreign corrupt
payments goes well beyond the stimulating scandal.
A proposal for "disclosure"
In rule-making, the SEC has proposed "disclosure" requirements
that have been widely misunderstood because they have been analyzed
at face value as disclosure of information. The SEC proposed that
companies state in 1979 annual reports whether the internal control
systems provide reasonable assurance of meeting the control objectives
specified in the FCPA at the end of 1979. In 1980, the same representations
would have been required for the entire year rather than only at year-end.
Auditors would have been required to state whether they disagreed
with that judgment in 1979 and to positively state agreement in 1980.
This proposal has been analyzed as if it were similar to disclosure
of replacement cost data or line-of-business (segment) data. It has
been viewed as another "accounting headache" rather than
recognized for what it is -- a permanent electrode planted in the
figurative brain of every corporation subject to the 1934 act.
Nevertheless, the proposal attracted a barrage of nearly 1,000 comment
letters -- almost all of them against it. The SEC delayed action for
1979 and may adopt a milder version for 1980 or later. The delay has
been characterized as "a staged retreat" that "threatens
to become a rout." However, I believe the proposal is only the
opening battle in a long war.
The SEC and the courts have always interpreted the securities acts
to meet changing public expectations, In today's public climate, deregulation
is almost automatically praised and increased regulation opposed,
but the climate can change quickly. Since the FCPA is part of the
law, it will not change and cannot be influenced by public attitudes.
Future enforcement actions and rulemaking are limited only by the
FCPA, which is tantamount to a federal code for corporations developed
and enforced by the SEC.
The securities acts are based on disclosure and most of the SEC's
rule-making involves requirements for disclosure of information. Thus,
it is probably natural that the recent internal accounting control
proposal was put forth and has been analyzed as a matter of disclosure.
However, disclosure is not the objective.
The actual objective -- compliance
Initial consideration of reports on internal control by the AICPA
and past use of reports on internal control in practice involved reports
closer to a management letter than an opinion. These reports are relatively
detailed and describe weaknesses. They are useful primarily to those
who can make changes in the system or base decisions to withhold funds
on the condition of the system. However, the SEC proposal contemplated
removal of weaknesses, not disclosure of them. It was structured to
achieve compliance with the FCPA and not to provide information content,
even though the SEC argued that its objective was to provide information
A management statement to meet the requirements of the proposal could
be nothing other than a paraphrased declaration of compliance with
the act. By proposing reporting as of the end of 1979, the SEC would
have permitted companies to correct weaknesses during 1979 and not
disclose them. This grace period would have exerted pressure to get
the house in order.
The SEC suggested that one of the benefits of the proposed management
statement would be increased assurance of the reliability of un-audited
interim financial information. However, no case has been made that
such information is now unreliable, and a disclosure provision on
internal accounting control is too indirect a method. The SEC requires
certain registrants to have interim data reviewed by their auditors.
The review requirement could and should be expanded to other registrants
if the SEC is really concerned about the reliability of interim data.
Finally, the proposed management statement used the same standard
for an exception as for a violation of the FCPA "reasonable assurance."
Both the FCPA and the proposed disclosure requirement had no materiality
limitation. Since immaterial information is unlikely to affect the
market price of the issuer's securities, the proposed disclosure is
obviously more concerned with achieving compliance than providing
information useful to investors.
Also, the reasonable assurance standard would allow management to
avoid disclosing weaknesses if it could justify the costs of correction
as exceeding the benefits of reducing the risk of an error or irregularity.
In other words, a material amount of assets could theoretically be
at risk, but the risk would not be disclosed if cost of correction
exceeded the potential monetary effect. The AICPA has pressed for
a standard dependent solely on materiality and risk, but the SEC has
clung to the cost-benefit approach under reasonable assurance.
The economics of "disclosure"
In addition to arguments against the constitutionality of requiring
a declaration of compliance with the law and objections to the law's
subjectivity, some have argued that the proposed management statement
and companion auditor involvement should be subjected to a rigorous
economic analysis of the costs and benefits of disclosure.
The unscholarly analysis is that with an estimated 20 percent increase
in audit costs combined with internal costs of documentation and review,
the overall cost will be over $160 million annually. Since the highest
estimates of illegal payments made over many years place them at a
total of $300 million, it will soon cost more to stamp out bribery
than to allow it.
A scholarly analysis would attempt to determine whether disclosure
would be rewarded in the marketplace by increased returns on stock
price or whether alternative incentives for disclosure would provide
information without disclosure regulation. However, this approach
should not be expected to be any more convincing than similar research
related to financial disclosure under the securities acts.
The fact that research does not support the need for regulation of
disclosure to produce all the financial information that investors
need has not stimulated any serious consideration of repeal of the
securities acts. Thus, the fact that the SEC's rule-making to achieve
compliance with the FCPA may not be cost beneficial as an informative
disclosure, or even that the costs of the FCPA may not be economically
justifiable, will not result in repeal of the FCPA or impede so-called
The real question -- what will the SEC do?
The real question is not how the SEC will modify its disclosure proposal
or what the requirements will be for 1980, but how the SEC will use
the FCPA over the next 45 years in enforcement and rule-making.
In 1934 it was probably of great interest to know which financial
statement disclosures would be required in 1935. However, consider
what has happened in the intervening years with the securities acts
which granted broad jurisdiction to the SEC over audited financial
statements. The SEC's impact on financial reporting is readily apparent
in the extensive body of accounting rules either issued by the SEC
or issued by the AICPA or the Financial Accounting Standards Board
under the SEC's oversight.
The audit requirement in the securities acts assured a minimum demand
for audit services and tied the growth of the accounting profession
to the securities markets. It also strengthened the auditor's ability
to influence the presentation of financial statements and resist client
pressures, and it gave stature to the accounting profession's standard
Rule-making and enforcement by the SEC or standard setting by the
accounting profession acting under the threat of the SEC's rule-making
power have resulted in a rigid definition of auditor independence;
impediments to changing auditors; codification of auditing standards
and procedures; defensive auditing practice in response to liability;
and a self-regulatory organization with quality control and peer review
requirements. With this perspective, what are the possible implications
of internal accounting control as a law administered by the SEC?
I believe that SEC rules on the control procedures and documentation
required to comply with the FCPA will remain flexible, but there will
be a trend toward more detail and selective use of authority
to achieve particular goals. Certain things will be required, but
no comprehensive rules on how to comply with the FCPA will be issued.
The control environment as stressed in the SEC disclosure proposal
will be a fertile source of specific requirements. It is a mixed bag
of conditions, methods and goals which include organizational structure,
competence and integrity, and budgets and financial reports. Many
auditors believe that the control environment is too broad to be useful
in reviewing a system, and they object strenuously to the idea that
evaluation of the environment is an essential prelude to an evaluation
of the system. They contend that controls must be tested and evaluated
in specific applications. The control environment is viewed as either
untestable or, at best, a source of background information. However,
environment, according to the SEC, includes the audit committee; the
internal auditor; a corporate code of conduct; and documentation of
policy and management's review. Thus, emphasis on the control environment
in rule-making and enforcement can and, I believe, will be used to
ultimately require, for example, audit committees and possibly to
secure a bigger role for internal auditors.
The relative responsibility of management and the independent auditor
for information on internal accounting control will remain flexible
and be debated just as it is for financial statements. The balance
will shift back and forth depending on the SEC's immediate objective.
In auditing practice, there will be a trend toward greater uniformity
in the approach to auditing and better integration of the general
and computer aspects of an audit.
SEC rule-making and enforcement will shift the risk/cost ratio of
incurring costs for documentation, auditing and other surveillance.
These costs will fall disproportionately on smaller companies, and
the results will be increased barriers for entry to public securities
markets and less capital for innovation and expansion.
Other federal, state and local agencies will seek authority comparable
to the SEC's and implement similar "disclosure" requirements.
Prime candidates for such regulation are banks, casinos, charities
Educators will revise the accounting curriculum to view accounting
as involving both information and control with equal emphasis on control.
The primary point
However, the primary point is that the FCPA -- and SEC administration
of it -- is not temporary regulation. The FCPA is the law, and it
makes internal control the law. Thus, attention to current proposals,
such as disclosure concerning internal control, should not cause us
to lose sight of the fact that the FCPA is not simply another section
of the securities acts. It is the most potent enforcement and rule-making
tool ever placed at the disposal of a federal agency.
(1) Gordon Thomas
and Max Morgan-Witts, The Day the Bubble Burst (New York: Doubleday
& Company. Inc., 1979).
(2) CPA Handbook,
vol. 2., chap.16 (New York: American Institute of Accountants. 1953).
QUESTIONS AND ANSWERS
Question -- Dr. Saxe:
I want to know about the effects of materiality; does it apply to
the bribery section as well as to the internal accounting control
section, and if it differs, what is the difference?
Materiality doesn't apply in either section. My concern was that as
a matter of disclosure, the SEC proposal -- by ignoring materiality
-- was obviously not intended to provide information. If the concern
was with providing information to investors it would be reasonable
to apply some kind of materiality standard. The fact that a materiality
standard was applied in required disclosure would in no way change
the law and its enforcement side. For enforcement purposes, any difference
in the accounting records or weakness in controls can be used to support
a charge that a company has violated the Act. The burden would be
on the company demonstrating that the failure to correct the weakness
was based on a careful evaluation of the cost and benefits and that
they had made and documented their judgments. The only out provided
in the act with respect to the internal accounting control provision
is cost-benefit. For the accurate books and records provision, any
mistake in the accounting records would be an inaccuracy and might
be subject to prosecution. There is some general wording I believe,
that the books and records should "accurately and fairly reflect
in reasonable detail."" But that's not materiality, and
the discussion of those particular words is also very sparse in the
What's holding up the proposal the SEC made in March for disclosure
by management of a statement on internal accounting control?
When the SEC made the proposal it asked for comment letters and received
over one thousand responses. Almost all of them were against the proposal.
Thus, the public climate was not favorable for the kind of disclosure
proposal the SEC had made, so time was needed to revise it. Too much
time elapsed for the SEC to adopt any requirement for 1979 year-end
filings. I believe at this point the SEC still has not figured out
what to do. We've had continuing discussions with the SEC staff. They
would like to have confidence that all registrants have a system of
internal accounting control that will provide reasonable assurance
of preventing illegal payments in amounts that are qualitatively material,
even if quantitatively immaterial. If a payment would have
to be disclosed under some provision of the Securities Acts it would
be qualitatively material. The Chief Accountant's staff, I believe,
would like to find some way to have the independent auditor provide
assurance that there are no weaknesses that would permit illegal payments
in amounts that would be qualitatively material. Of course, there
is no way for any system to prevent illegal payments in amounts that
are quantitatively immaterial. But the Internal Accounting
Control provision was sold to Congress on the basis that it would
prevent these kinds of things from happening and the SEC staff clearly
believes that objective must be achieved. How to do it at a reasonable
cost is the problem and no one seems to have a ready answer.
How was it sold to Congress so easily?
The way legislation usually is passed. There was a real uproar and
concern, a lot of attention nationally was focused on the issue. Hearings
were held. The Chairman of the SEC testified and said that the accounting
control provision was necessary to prevent bribery and would assist
the SEC in doing that. The proposed legislation had four parts and
two parts were taken out largely as a result of the testimony of a
representative of the accounting profession. However, the two remaining
provisions on accurate books and records and required internal accounting
control, were certainly the most important and basic.
They were adopted almost exclusively as a result of the SEC's urging.
How difficult might it be to prove in court that a company had a system
that provided reasonable assurance given an actual diversion of funds
or fraud of some kind?
It would be very difficult to prove. A company would need to demonstrate
good faith. I believe that that's why there is pressure to take steps
that are regarded as necessary to demonstrate compliance, such as
having an audit committee, adopting a code of corporate conduct, having
an internal auditor to provide surveillance of areas that might involve
illegal payments, and obtaining confirmations from officers in key
positions that in their areas there is an adequate system of internal
accounting control. This is a kind of a due diligence demonstration.
The more that a company can do of that nature, the more defensible
position they're in. Nevertheless, proving that the controls that
would have prevented a fraud that occurred were not cost beneficial
is going to be very difficult because inevitably they'll be based
on some probability evaluation -- the chance that that kind of fraud
might occur. However, when a company ends up in court the probability
will be one, or one hundred percent. So the original estimate of the
risk of loss will apparently have been inaccurately measured, even
though it might have been the best possible estimate. Thus, the cost
benefit computation that a company went through in the decision to
adopt or not adopt a set of control procedures that would have prevented
a particular fraud isn't going to carry much weight at all. However,
if they can trot out enough people that say wonderful things about
the kind of system they have and the code and what the internal auditors
do and how much the audit committee does and all of that, that might
carry some weight. Even though it might have nothing to do with preventing
that particular fraud.
Why did you say that the cost of compliance, the costs involving documentation
and increased auditing costs and so on, would fall disproportionately
on smaller companies? Also, what effect will that have on those companies?
The cost is disproportionate because, for example, the cost of producing
a policy manual is a relatively fixed cost. The cost of producing
a policy manual for a huge company is not going to be that much greater
than the cost for a smaller company. This will mean that the costs
of being a public company are that much greater so that there will
be barriers to entry to the securities markets. The cost to a company
of selling securities in the public markets will go up. This is one
of many areas where the costs fall disproportionately on small companies.
Today, there is substantial concern with trying to alleviate other
costs of regulation that are seen now as inhibiting the growth of
smaller companies and the ability of small companies to use the securities
markets. The SEC is devising new forms to make it easier for those
companies to file, and providing exemptions and so on. However, when
a new proposal like the disclosure provision of the Foreign Corrupt
Practices Act comes along, the SEC is reluctant to exempt smaller
public companies because all companies have to comply with the Act.
It's possible that after many years these increased costs and the
fact that they fall disproportionately on smaller companies will be
recognized by some Presidential Commission on Small Business and then
repeal might be considered, but the argument doesn't carry much weight
Are there different reporting requirements or other requirements for
domestic versus foreign corrupt practices?
There are none. Even though it's called the Foreign Corrupt Practices
Act, the requirements that relate to accurate books and records and
internal accounting control do not have to involve foreign locations
and they do not have to involve corrupt practices. The SEC can and
has invoked those provisions of the act without any bribery, foreign
or domestic, being involved.
Comment -- Dr. Mellman:
Apparently, the Act has already made itself felt in the academic institutions,
not in terms of the curricula, but rather what we see is that corporations
are coming on-campus recruiting for accounting graduates of the calibre
that normally gravitate to public accounting firms. Thus, for example,
we have within a very short of time Morgan Guaranty, IBM, and Bethlehem
Steel coming to Baruch to recruit undergraduate accounting majors.
They're looking for the types of people that would normally be picked
up by large accounting firms and they're offering a substantially
higher salary, all with the intent of beefing up, and this is my understanding,
their internal audit staff, and this is a growing factor in the recruiting
process, as I see it.
Comment -- Dr. Carmichael:
In general one of the results of the Act is the transfer of wealth
to the accounting and legal segments of the economy.