Leading the hearing, subcommittee chairman James Greenwood addressed Duncan with a matter-of-fact accusation. 

"Enron robbed the bank. Arthur Andersen provided the getaway car and they say you were at the wheel," said Greenwood.

When asked if he gave "an order to destroy documents in an attempt to subvert governmental investigations into Enron's financial collapse," Duncan, with counsel seated to his left and right, responded: "Mr. Chairman, I would like to answer the committee's questions, but on the advice of my counsel I respectfully decline to answer the question based on the protection afforded me under the Constitution of the United States."

Greenwood promptly responded "I am disappointed to hear that" before dismissing Duncan.

Levitt Returns to the Stage

Also yesterday, former SEC chairman Arthur Levitt testified before the Senate Governmental Affairs Committee that is investigating the larger regulatory landscape that failed to detect the problems at Enron.

Levitt is no stranger to this controversy. Just a few years ago, an increase in lucrative consulting engagements with audit clients prompted the SEC to propose new rules for auditor independence, limiting the services provided by the audit firms to their audit clients. As immediate chairman of the Securities and Exchange Commission -- and the longest serving chairman in SEC history -- Levitt tried hard to modernize the auditor independence rules, but had tough competition from the AICPA, large accounting firms, and even Congress. In fact, in October 2000, Levitt asked Congress not to interfere with the SEC's auditor independence rulemaking process. (Hear SmartPros' interview with Arthur Levitt)

Appearing none too surprised that he was addressing this issue once again, Levitt testified before the Committee with recommendations on how to clean up the accounting profession.

First, better expose Wall Street analysts' conflicts of interests. "As long as analysts are paid based on banking deals," said Levitt, "there will always be a cloud over what they say."

Second, drop consulting fees, use of corporate aircraft without reimbursement, and other "corporate seductions that are present in all too many board rooms in this country."

Third, "update accounting rules to better reflect changing business practices to give investors a better understanding of the underlying health of companies." Levitt explained that the Financial Accounting Standards Board, though well-intentioned, often succumbs to Congressional pressure from powerful constitutents that "hope to undermine a rule that undermine the earnings." Levitt recommended that FASB be composed of "the people with the best judgment, not merely those that represent constituents interests."

Fourth and "most urgent," said Levitt: separate auditing and consulting. "This type of work only serves to help management get around the rules. Audit committees -- not company management -- should preapprove all other consulting contracts with the audit firm. Such approval should be granted rarely and only when the audit committee decides a consulting contact is in the shareholders best interest."

Lastly, Levitt proposed that audit firms rotate partners every five to seven years to "ensure that fresh and skeptical eyes are always looking at the numbers."

These recommendations, defeated in the past, may be heeded with the collapse of one of the largest companies in the country and the demise of Big Five firm Andersen.