Despite the stampede of corporate scandals in recent months, the ruined portfolios and pensions of hundreds of thousands of Americans and the clear signs that increasing numbers of investors have little faith in the integrity of the financial markets, Congress has been painfully slow to respond. If Arthur Andersen, a key player in this debacle, can be praised for anything, it is for being on the wrong end of a guilty verdict that at last has produced significant movement.

The Senate Banking Committee on Tuesday approved accounting legislation that addresses the two key issues needed to restore confidence in the markets – curtailing conflicts of interest by placing strict limits on the consulting services auditing firms can perform and ensuring truthfulness through tough, independent oversight. The vote was a lopsided, bipartisan 17-4. It came despite frenzied lobbying by the accounting industry and, not at all coincidentally, just three days after Andersen, once the flagship of accountancy, was convicted of obstruction of justice.

The measure includes something those lobbyists most feared – a regulatory board composed mostly of people outside the industry and armed with substantial subpoena power. The committee vote came on the same day the Securities and Exchange Commission unveiled its plan for a very similar board. Both boards would also be able to discipline accounting firms by imposing fines or suspending them from auditing publicly traded companies.

Restoring corporate integrity and public faith is no small matter. The floundering financial markets have taken a heavy toll on everything from personal bank accounts to state revenues and the consistent failure of government to protect its citizens – in this case to protect investors from fraud – is a major reason.

This important action in the Senate comes when it is most needed. Later this month, Xerox, that bluest of blue chips, will restate its earnings for the years 1997 through 2000. It may be the biggest restatement in corporate history and likely will become the mother of all failed auditing horror stories – $3 billion in bogus revenues, pre-tax earnings artificially inflated by $1.5 billion, all the result of cooked books approved by its outside auditing firm pressured by Xerox executives. Numbers of that size coming from a company of that stature will send a jolt through the markets that only strong government action on the side of honesty and fairness can mitigate.

If this bill passes the full Senate, it will have to be reconciled with the House bill, passed earlier this year when financial report malfeasance still was viewed as a rare occurrence, that is a weak and vague piece of legislation preferred – no surprise – by the accounting industry. If that reconciliation goes as it should, and as recent events demand, the investing public will have Arthur Andersen to thank.