Pitt, who until last year was a lawyer and advocate for the accounting industry, also said he will not recuse himself from the investigation into the collapse of energy trader Enron and its auditor, Arthur Andersen. Pitt said that he is not actively ''participating'' in the probe.

The independent board, composed of non-industry appointees, would be empowered to investigate accounting irregularities and discipline firms, Pitt said.

Arthur Levitt, the former SEC chief who tried and failed last year to make accounting firms more independent and end dual roles of providing accounting and auditing services as well as consulting work, said Pitt's plan ''sounds like a very constructive step.''

The proposed private-sector group would eliminate disciplinary authority by the American Institute of Certified Public Accountants and the CPA Institute's Public Oversight Board.

The Enron debacle, which is the largest corporate bankruptcy filing in history, has given the accounting industry a black eye.

Barry Melancon, president of the AICPA, said, ''The profession polices itself very well, but that doesn't mean you can't make improvements.''

Critics, however, were quick to spear Pitt's plan and his decision not to recuse himself from the Enron inquiry.

''Recusing himself would be a first step in restoring confidence,'' said Bill Patterson, head of investing for the AFL-CIO pension funds.

Rep. John LaFalce of New York, the ranking Democratic member of the House Financial Services Committee, called Pitt's proposal an ''incremental step,'' but said, ''The creation of a stronger and more direct federal role in the oversight of the accounting profession may be necessary to restore confidence in the profession and securities markets.''

Patterson also said President Bush should find two new nominees for the SEC who are independent of the accounting industry. Bush nominated Paul Atkins of PricewaterhouseCoopers and Cynthia Glassman of Ernst & Young.

-- by Noelle Knox and Jayne O'Donnell