Among the changes unanimously backed by the panel: base U.S. accounting rules on transactions and activities to avoid special treatment for various industries, limit corporate financial restatements to meaningful mistakes, and provide more protections from lawsuits or SEC enforcement actions for companies and auditors exercising "reasonable" professional judgment.

Any move away from industry-specific accounting would be a big change likely to touch off controversy, according to MFS Investment Management Co. Chairman Robert Pozen, who heads the SEC advisory panel on improvements to financial reporting. Pozen predicted "all hell's going to break loose" once the group issues the recommendation, intended to reduce complexity and make corporate results more comparable from industry to industry.

Shielding companies and auditors from second-guessing or lawsuits when they exercise professional judgment is sure to be controversial as well. The advisory group urged the SEC to issue a policy statement or a legal "safe harbor" protecting firms and auditors from enforcement action or legal challenge provided they acted in good faith and made a "reasoned" evaluation based on relevant information available to them at the time.

On restatements, the advisory group called for companies to correct errors when they are discovered and issue restatements only for material items, an approach that would reduce the number of restatements.

The group also wants to shed more light during the so-called "dark period" after a company announces that it has found a material error but before it issues a restatement of prior financial results. The advisory panel called for companies to describe the error, the periods that might be affected and that are under review, and give an estimated range of the error's size, any impact it might have and what management plans to do to prevent such errors in the future.

Deloitte Touche Chief Executive James Quigley, who serves on the panel, called the recommended approach "a giant step forward" and panel member Scott Evans, a senior vice president for asset management at TIAA-Cref, a pension fund for teachers, said expanded disclosure "will definitely help investors."

The group also endorsed a compromise proposal on data-tagging technology by calling for the 500 largest U.S. public companies to furnish reports to the SEC using data tags for part of the financial statements. The tags, akin to bar codes for individual items in a financial report, make it easy to find and compare corporate results. That, advocates say, will benefit investors, analysts and regulators.

The SEC advisory panel is slated to meet again in March and issue a final recommendation this summer.