At the same time the Public Company Accounting Oversight Board (PCAOB) is warning auditors not to overdo internal controls testing, the government is revamping portions of the law that required the testing in the first place.
PCAOB Chairman William McDonough told auditors to expect a “severe conversation” if the board thinks they are gouging clients to run up fees, CFO.com reported.
McDonough's comments came as part of a roundtable discussion held by the Securities and Exchange Commission. He discussed the PCAOB's inspections of audit firm work on the Sarbanes-Oxley Act's Section 404, which guides companies' assessments of their internal controls and auditors' reports on those assessments, CFO.com reported.
Noting that the PCAOB inspection process is carefully designed to be evenhanded, he said: "It is at least as likely that we will find that the work they did was excessive as it was inadequate. Now, will we throw someone in jail for excessive audit? Not likely. However, will we have a very severe conversation with the management of that audit firm? You bet."
United Press International reported that the SEC and PCAOB are considering revamping some portions of the 2002 Sarbanes-Oxley Act, saying that while some areas are helpful in tightening internal controls over financial reporting, other provisions remain poorly understood and appear to be duplicative, corporate leaders told the two government agencies.
"It's very clear that the American people are saying 'It's a wonderful idea, but it costs too much,"' said McDonough.
He indicated that the board would likely issue staff guidance within 30 to 45 days to help clarify some aspects of the standard.