This month, five former executives of the world's biggest copier maker, Xerox, including former CEO Paul Allaire, agreed to pay US$22 million to settle regulatory charges that they inflated revenue over four years.

The Securities and Exchange Commission has sued Xerox's former auditor KPMG and four of its partners in connection with the alleged fraud. The former Xerox executives may also face criminal charges.

These events exemplify the zealous regulatory approach to financial reporting in the United States since Enron collapsed two years ago, setting off a chain of accounting scandals.

And because Enron's auditor, the now-defunct Andersen, was apparently complicit in the energy trader's fraud, accountants rushed to validate their honesty to a cynical public.

In March, the Australian Stock Exchange's Corporate Governance Council published desirable principles of good corporate governance.

It came after Australia had experienced its own Enron-style scandal with HIH Insurance.

The Australian Government has now recommended an independent body be charged with overseeing new auditor independence requirements.

New Zealand's stock exchange is collecting submissions on corporate governance proposals.

It suggests, among other things, compulsory audit committees with a majority of independent directors, and the rotation of audit partners every five years. This means that although a single firm may audit a company for decades, the person managing the work must change.

Last month, after months of consultation, New Zealand's reaction from the Institute of Chartered Accountants appeared.

Its report is to form the basis of wider consultation by the Securities Commission.

The institute's document did not make issuers' audit committees compulsory.

It suggested that auditors rotate every seven years rather than five and that potential conflicts of interest created by auditors carrying out non-audit work should be addressed through self-regulation.

The document congratulated New Zealand business on having "much of which they can be proud".

"The great majority of the business community", it said, "carries out its work in an honest and professional manner."

So is that good enough?

New Zealand, it is generally agreed, went through the greed cycle in the 1980s.

The corporate trough-snuffling uncovered in the United States had its time here when legwarmers were still cool.

That hasn't necessarily ensured purity among boards - a solid old boys' network, for example, means directors continue to be drawn from a small pool - but fraudulent behaviour has not appeared on New Zealand's corporate radar of late.

Ralph Marshall, president of the New Zealand Institute of Chartered Accountants and Deloitte partner, is aware the performances of Tranz Rail and Tower have raised questions about this issue.

Tranz Rail's share price collapsed after revelation of its liquidity problems, and Tower cut the book value of its assets by $190 million after it applied different accounting standards.

Marshall defends their actions as being different to behaviour in the United States.

"In the United States there was clear evidence of fraud and manipulation of what was happening.

"Accounting isn't a pure science. You are making a decision on the value of assets against circumstances at the time."

So, with the apparent honesty of New Zealand corporates in mind, the institute produced 22 broad recommendations for better governance.

Critics say some recommendations are simply too weak.

While they are happy with recommendations such as introducing ethics early in accounting education, they see a lack of clout in the vital issue of auditor independence.

And, some argue, even if it is accepted corporates are generally honest, an overseas perception that New Zealand does not encourage vigilant corporate policing could dent investor confidence.

In Australia and the United States, the lead audit partner rotates after five years.

Australia's top 500 companies are required to have audit committees, which are also compulsory for all companies in the United States that are publicly listed.

The United States' rules on whether an auditor can also carry out consulting work, seen as a key factor in the Enron collapse, are tougher than either Australia's or New Zealand's.

The institute, meanwhile, points to other recommendations as proof of its commitment to corporate purity.

It is proud the proposals are for all public issuers, all companies that have raised money from the public, which captures around 1500 companies compared to the 200-odd captured by the stock exchange rules.

"We've taken the approach," says Marshall, "that it should apply to all companies that have raised cash from the market ... That is a significant widening of corporate transparency."

The institute points to its recommendation that public issuers disclose in their annual reports how they protect shareholders' rights.

That, it says, means that even if a company doesn't have an audit committee it has to explain why not.

But Staples Rodway partner Rob Matthew believes the greater scrutiny audit committees provide make them invaluable.

"Committees that an auditor reports to and that are independent mean much greater grilling and discussion," he says.

The institute says it rejected the idea of rotation of audit firms as unrealistic and settled on the seven-year lead partner rotation.

Marshall says some of the smaller towns would have struggled with the requirement of a five-year rotation and audits would all have ended up with the larger firms.

Even so, both recommendations are under review and Marshall says the requirements may still change.

In the United States many aspects of consultancy work are banned for auditors and all other work has to be approved by the audit committees.

However, in New Zealand, the big four auditors continue to act as consultants for their audit clients on matters such as tax.

And there is still scope for New Zealand companies to take hefty consultancy fees from companies they also audit - identified as a danger in the Enron collapse.

The institute says it will avoid that danger because it recommends mandatory disclosure of payment to auditors for non-audit fees.

But it also suggests that audit firms "identify any threat created by the provision of non-audit services and implement safeguards to eliminate or reduce those threats ... "

In other words, the corporate is responsible for looking after threats itself, with the institute as a backup.

Marshall defends the recommendation, saying it is still under review and, right now, the institute has to "give guidance to its members".

But former commercial lawyer and investment banker Michael Walls is not convinced of the report's value. Walls, a business consultant and chairman of Fletcher Challenge Forests' audit committee, calls it a cop-out.

"New Zealand equity markets can't afford to be seen as sitting on the sidelines in this matter of ensuring auditor independence."

Walls is very concerned about perception and says that "somehow the institute's approach doesn't seem satisfactory, in light of the concerns and overt actions of other countries with bigger, competing markets for investments".

Walls says independent auditing issues must be addressed rapidly.

Otherwise, he says, New Zealand equity markets are in danger of appearing "distracted, indecisive, insular, protective of cosy and profitable habits, insensitive to the lessons overseas and uncompetitive in terms of investor protection and assurance".