The Senate Banking Committee has decided to investigate what role the accounting profession should play in preventing another financial crisis.

The Senate is holding a hearing on Wednesday, April 6, to gather input from rule makers and regulators, including James Doty, chairman of the Public Company Accounting Oversight Board, Leslie Seidman, chairman of the Financial Accounting Standards Board, and James Kroeker, chief accountant at the Securities and Exchange Commission.

The committee also has summoned former SEC chief accountant Lynn Turner and Anton Valukas, chairman at law firm Jenner & Block who oversaw the bankruptcy examination of Lehman Brothers. Valukas authored a report that described Lehman's desperate accounting maneuvers to hide debt off the balance sheet, all approved  by the audit firm, Ernst & Young, as the firm crept closer to collapse.

The Senate Banking Committee says it may announce additional witnesses before the hearing. The committee provides no insight beyond the title of the hearing into what it plans to investigate. The hearing title focuses on what role accountants should play in preventing another crisis, but there's no suggestion the committee will seek information on what role accountants had in the last crisis.

The PCAOB recently promised to take a fresh look at whether it should develop new rules that would draw more information out of auditors about what they do in the course of an audit and what the audit reveals. Investors have called on the PCAOB to examine more carefully what went wrong in the audit process to allow major financial institutions to file clean financial statements that provided no hint of impending problems leading up to the financial crisis.

The European Commission is looking more broadly at the audit process and the audit profession to determine what kinds of changes might be appropriate. The EC published and collected feedback on a “green paper” late in 2010 to collect a variety of views. The goal is to determine whether the role of the auditor should be revisited, how communications can be improved, whether there are conflicts of interest that compromise audit quality, how to assure effective and independent supervision of auditors, and whether audit talent is too concentrated among a small handful of firms.

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