Confidential documents released by BDO Seidman are fueling concerns about the future of accounting reform. The documents dispute statements made by William Webster, head of the Public Company Accounting Oversight Board (PCAOB).
Mr. Webster chaired the audit committee of US Technologies, a company now facing fraud charges. He reportedly told the press the company fired BDO over a billing dispute. But BDO says it was an accounting dispute. To prove its point, BDO got permission from its former audit client to release documents sent to the audit committee a month before it was fired. The documents list BDO's concerns about material control weaknesses and cite Mr. Webster as a participant in the call.
The nature of the dispute raises questions about why Mr. Webster did not investigate the weaknesses cited by BDO. A report by Reuters said Washington insiders are already speculating about possible replacements for Mr. Webster. The list includes John Biggs, as well as Charles Bowsher and Aulana Peters, both of whom served on the accounting profession's Public Oversight Board.
Controversy over Mr. Webster's appointment led earlier this week to the resignation of Securities and Exchange Commission Chairman Harvey Pitt. Many observers expect Chairman Pitt's successor will appoint a new chief accountant to replace Robert Herdman who is also involved in the controversy over Mr. Webster's appointment. The resulting turmoil and turnover comes at a pivotal time for accounting reform, causing concern that reforms will be derailed because of delays in rule-making initiatives mandated by the Sarbanes-Oxley Act.