Accountants complain that out-of-date accounting rules helped create the scandal at Houston energy trader Enron Corp.

But when the board that creates those standards has tried to overhaul them, guess who has often stood in the way.

Accountants, according to academic and industry experts.

The Big Five accounting firms have frequently opposed attempts to give investors a clearer picture of corporate debt, expenses, and overall risk level, according to documents filed with the Financial Accounting Standards Board and reviewed by The Inquirer.

Accountants should have been championing change, not fighting it, several accounting professors said. "They say they're for motherhood, but they're selling prostitution," said Bob Jensen, an accounting professor at Trinity University in San Antonio, Texas.

Representatives from three of the five largest firms defended their statements on FASB rules. Two did not return phone calls. The main accounting professional association pointed to Congress as the primary source of pressure on the board.

Dennis Beresford, chairman of FASB (pronounced FAZ-bee) from 1987 to 1997, said he thinks the process of setting accounting standards takes "way too long" but works well. "Congress and the [Securities and Exchange Commission] are very appropriately involved in overseeing FASB, but Congress should be interested in the overall process, not interfering with technical decision-making," he said.

FASB may sound like an obscure group, but it can wield immense power. The seven-member board, culled from industry and academia, creates most of the rules that determine what companies tell shareholders about earnings and other crucial financial items. When it changes a rule, corporations often must take charges totaling in the billions of dollars.

Funded through sales of its publications and donations, FASB is supposed to be independent. But it also relies heavily on accountants at the Big Five - Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG Peat Marwick, and PricewaterhouseCoopers - for research and guidance.

That input often puts immense pressure on the board.

"It's like any other political process," said David Larcker, a professor at the Wharton School. "We could make the same argument about the tax code, about Medicare."

Politics is not the only problem. Accounting issues at modern companies have grown more complicated, leaving room for reasonable people to disagree, Larcker said.

At Enron, complex off-the-books partnerships hid billions in debt and other financial obligations that led to the company's December bankruptcy filing. Off-the-books partnerships have been so controversial that accountants have debated the rules on them for about 20 years.

In a December Wall Street Journal opinion article, Joseph Berardino, chief executive of Arthur Andersen, blamed accounting rules, in part, for the problems of his client, Enron.

"We have fostered a technical, legalistic mind-set that is sometimes more concerned with the form rather than the substance of what is reported," Berardino wrote. "Enron provides a good example of how such orthodoxy can make it harder for investors to appreciate what's going on in a business."

Jensen said he found the statements hypocritical.

"Large firms often come down squarely on both sides of a controversial issue, sometimes preaching virtue but not always practicing what is preached," he said.

Andersen spokesman David Tabolt said his firm had tried but failed to promote better rules for accounting for such partnerships. Berardino also has said Andersen will accept responsibility for any mistakes the firm made at Enron.

Over the years, accountants have waffled on many issues, but stock options created the most notorious controversy, Wharton professor emeritus Peter Knutson said.

Companies issue stock options, which represent a right to buy the stock at a certain price, to executives as an incentive to push the stock price higher through good management. If the share price rises above the price at which the option was issued, the executive keeps the difference.

Enron executives cashed in $1 billion in stock options in the last decade as the stock price soared, illustrating the huge reward management can yield.

But companies might not have used options so aggressively had they been forced to account for them as FASB tried to insist in the mid-1990s.

Stock options are compensation, so they are an expense when a company grants them. But most companies do not deduct them on their income statements. And when options are exercised, they create more shares outstanding, reducing earnings per share.

"If I give you something of value, you expect it to show up somewhere on the income statement," said Larcker, who served on a FASB task force on options.

In 1993, FASB tried to require companies to expense the value of their stock options. The proposal would have slashed earnings at many companies, especially technology firms where options - but not profits - were plentiful.

Corporate America scrambled to oppose the rule. On March 25, 1994, about 3,000 Silicon Valley workers paraded into the San Jose Convention Center to protest FASB's decision.

The event came to be known as the "Rally in the Valley," and it was a clear sign that FASB was under fire.

While tech employees took their fight to the streets, the Big Five accounting firms lobbied more quietly. All five wrote letters to FASB protesting the proposed change.

"This issue is extremely divisive. There are strong differences of opinion in the accounting community on the theoretical issues as well as on the practical and implementation issues," Arthur Andersen partner Benjamin Neuhausen wrote to Beresford in a December 1993 letter. "Some battles are better not fought."

U.S. Sen. Joseph Lieberman, one of the congressional leaders now investigating Enron, demanded that FASB back down. Lieberman, the Connecticut Democrat who ran for vice president with Al Gore in 2000, introduced legislation aimed at limiting FASB's power.

Lieberman spokesman Dan Gerstein said the FASB options proposal would have hurt high-tech firms while not giving much useful information to shareholders.

"It was a bad rule," Gerstein said.

In the end, FASB compromised, allowing companies to either report the cost of options in a footnote, with no effect on earnings, or book them as an expense.

The furor over Enron now has partners at the Big Five talking about the need for change. The American Institute of Certified Public Accountants, a professional organization that includes Big Five members, said it sees room for improvement.

Dan Noll, director of accounting standards at the organization, said FASB does good work. Congress has been the real problem, he said.

"We do think FASB puts out the best standards in the world," Noll said, "but we think they can do even better work if they are allowed to operate on controversial issues without having to worry about the U.S. Congress involving themselves in the process."