SEC Chairman Harvey Pitt's representation of an accounting industry trade group while in private practice, as well as President Bush's nomination of two commissioners (economist Cynthia Glassman, attorney Paul Atkins) who work at Big Five accounting firms, seemed to irritate lawmakers during a House Energy and Commerce subcommittee hearing.

"At the time of the greatest crisis in the accounting industry, there is a problem at the SEC," Rep. Edward J. Markey (D-Mass.) said. "It puts the accounting industry in the catbird seat.

"Pitt is saying he's going to recuse himself from the Enron investigation, but he's not recusing himself from the rule-making process," Markey added. "There's a huge question we've got to ask. Is the SEC independent enough?"

Rep. Billy Tauzin, chairman of the full committee, continued the attack on the SEC in a statement, saying he was disturbed that the SEC made no meaningful review of Enron's financial statements and required filings from 1997 to 2001.

"For the SEC officials here, I have a message for you to deliver to Chairman Pitt," said Tauzin, R-La. "The SEC should be taking steps under existing law to prevent additional Enrons."

Tauzin also criticized Pitt's proposal to create a private entity to oversee the accounting profession. "This hasty proposal appears to have little substance and provides us with little comfort that meaningful change is coming," he said.

Meanwhile, SEC chief accountant Robert K. Herdman and Financial Accounting Standards Board Chairman Edmund L. Jenkins did their best to discourage lawmakers from seeking a complete overhaul of generally accepted accounting principles (GAAP), which form the basis for financial reporting in the United States.

In light of Enron acknowledging it did not follow GAAP rules, lawmakers queried the men on whether complete reform is needed. "The basic model is sound," Jenkins said.

Herdman added: "We need to continue to improve GAAP, and make [it] more responsive to the marketplace."

Issues such as revenue recognition, special purpose entities (SPEs), and indecipherable financial statements must be tackled by regulators, Herdman said.

FASB said it intends to enact rules by year's end on how companies should account for SPEs, which allow companies to access capital or boost leverage without adding debt to their balance sheet.

Also on Thursday, Enron CEO Stephen Cooper said in a statement that chief risk officer Rick Buy and chief accounting officer Rick Causey have been dismissed, effective immediately.

In an investigative report, Causey and Buy were blamed for not adequately supervising transactions between Enron and partnerships run by Andrew Fastow, its former CFO.