Former Central Intelligence Agency (CIA) chief William Webster has been appointed as chairman of a new body set up to regulate the US accountancy profession. The new agency is designed to prevent accounting scandals of the kind that engulfed corporate America earlier this year, leading to the collapse of Enron and Worldcom.
Mr Webster saw off a challenge from rival candidate John Biggs, head of a major US pension fund. But Mr Webster's appointment – backed by Republicans and senior accountants – has proved controversial, with some commentators saying that he is less likely to push for far-reaching reforms of the audit profession.
Critics have also said that Mr Webster does not have enough direct accounting experience to do the job.
The accounting profession and some Republican politicians had objected to Mr Biggs' candidacy on the grounds that he would impose excessive regulatory burdens on the audit industry.
Mr Biggs, formerly a member of the National Association of Securities Dealers' accounting body, has been portrayed as a champion of small investors and a keen supporter of accounting reform.
Mr Webster's appointment was confirmed on Friday after the commissioners of the Securities and Exchange Commission – the stock market regulator in charge of setting up the new audit watchdog – voted 3-2 in his favour.
The vote was split along party lines, with the three Republican commissioners – including SEC chairman Harvey Pitt – backing Mr Webster, and their two Democrat colleagues favouring Mr Biggs.
Mr Webster, also a Republican, is a former judge and lawyer from Missouri. He served as head of the Federal Bureau of Investigation (FBI) before being appointed as head of the CIA by President Ronald Reagan in 1987. He is currently a partner at corporate law firm Milbank, Tweed, Hadley & McCloy.
Some US politicians have said the political in-fighting within the SEC has cast doubt on its independence.
“The SEC…is becoming a laughing stock, riddled with conflicts of interest and White House operatives,” said Democrat congressman Edward Markey.
But Mr Pitt rejected suggestions that the SEC vote had been swayed by party political considerations.
“I am fiercely independent. I am beholden to no one,” he said.
The new audit body, known as the Public Company Accounting Oversight Board, was created under new laws pushed through the US Congress earlier this year in the wake of the Enron and Worldcom scandals.
Both companies collapsed after it emerged that they had misled investors over their true financial position by hiding debts or inflating revenues.
The affair thrust the audit profession into the spotlight, with investors and regulators asking why Enron and Worldcom's accountants had not blown the whistle on irregularities in the companies' books.
Arthur Andersen, which signed off both the Enron and Worldcom accounts, was earlier this year found guilty of obstructing an official enquiry into Enron's finances.