PCAOB Begins Inspections, Partner Pay to be Checked

The Public Company Accounting Oversight Board has begun inspecting America’s top eight accounting firms and its chairman put partners on notice that their compensation packages will be scrutinized.

Speaking before the a Practising Law Institute conference in Washington this week, PCAOB Chairman William McDonough said the board has begun work on the inspections of the top eight firms. The PCAOB has about 80 experienced auditors working on the inspections, which he said will include partner compensation. The board hopes to double the number of auditors by the end of the year, a board member said this week.

"We will take a look at compensation in the context of our reviews," McDonough said. "But we don't plan to issue specific standards," he added, noting the difficulty of such a move and saying because "we want good auditors to be compensated appropriately."

McDonough has been an outspoken critic of excessive executive compensation and has said the public’s outrage over the issue led to the speedy passage of the Sarbanes-Oxley Act of 2002, which created the PCAOB to clean up and watch over corporate America.

On Wednesday, PCAOB member Bill Gradison also told Dow Jones Newswires that the group's inspectors will look at partner compensation during the reviews.

"If we find a poor performer at the partner level was given the same promotions and compensation as a top quality performer, our inspectors will certainly ask questions," Gradison told Dow Jones.

The law requires that the PCAOB conduct annual inspections of accounting firms that audit 100 or more public companies, which are the eight now under inspection. Smaller firms are inspected every three years, Dow Jones reported.