The latest brouhaha concerns his meeting with the chairman of KPMG. Pitt says it was just a meeting to get to know each other, while the KPMG chairman says they discussed some substantive issues. The "he said, she said" nature of this disagreement about what was communicated implies that we shall never know who is telling the truth, but the event still shows a lack of political prowess. Given the revelations of accounting fraud recently as well as the multitude of earnings restatements, the logic for the meeting is missing.

Such a meeting also reminds us that prior to his appointment as SEC Chairman, Harvey Pitt was a lawyer who represented the then Big Five accounting firms at one time or another. This association would normally not be a problem, but it mushrooms into the proverbial cloud overhanging Washington as the politicians and bureaucrats try to extricate us from the accounting slump we find ourselves in. Wherever Pitt turns with respect to accounting concerns, these associations form rain clouds.

His January 18 speech stands as a more substantive criticism of the chairman. While analyzing the massacre of Enron, the best he could muster was that "corporate governance and accounting practices has shown serious signs of failing to keep up with the needs of today's investors …." He uses this assertion as a springboard to launch into an exhortation that we have to update accounting for the so-called new economy. This speech, and this argument in particular, enrages me because it demonstrates that the chairman has shown serious signs of failing to understand the ethical and moral decay found in corporate boardrooms and signs of failing to do anything about it. Rather than insist that managers, auditors, and directors tell the truth, he wants to encourage them to stay modern. The difference in perspective is astounding!

Harvey Pitt proposes to create a structure that examines ethical failings in the accounting profession, while his organization investigates and prosecutes alleged violations of the law. This new independent body will look at problems in accounting and auditing and will improve the peer review process and who knows what else. In the end, this is all nonsense, because the way you stop accounting fraud is to enforce the existing law and stop proposing new laws that you have no intention of enforcing. 

At a different time and facing different problems, Mr. Pitt might have served as a good chairman; however, at the current time and facing a crisis of credibility, the country needs someone who garners respect by courageously insisting that corporate America tell the truth in financial statements. Mr. Pitt should resign. If he reveals a pachydermatous exterior and refuses to resign, Congress should award his impudicity by investigating his record at the SEC. It lacks merit and valor; we need new leadership.

J. EDWARD KETZ is associate professor of accounting in Penn State's Smeal College of Business Administration.