Public Company Accounting Oversight Board's acting chairman recently announced that he has staff to develop a proposal to send to Congress a request that it consider a change to the Sarbanes-Oxley Act of 2002 that would enable the PCAOB's disciplinary hearings and related proceedings to be made public.
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Currently under the act, these hearings and proceedings are required to be nonpublic unless the board finds good cause to make them public and all parties consent to open them to the public.
"I believe the time has come for us to ask Congress to change the law and make our disciplinary hearings public, unless there is some good reason for a particular matter to be closed," said Daniel L. Goelzer, the PCAOB's acting chairman.
Public disciplinary hearings would conform to the long-standing practice at the U.S. Securities and Exchange Commission for public disciplinary hearings on matters regarding auditors.
Under current law, firms and auditors litigating with the PCAOB have little incentive to consent to public proceedings and can prevent proceedings from becoming public for long after the information would be most relevant to investors, other auditors, and interested parties.
"No other auditor, investor, audit committee, or member of the media is entitled to know what the PCAOB considers to merit discipline, whom it has charged, what issues are being litigated, or whether the PCAOB staff has prevailed or not," said Goelzer. "The public is in the dark about how the board uses its enforcement authority until there is a settlement or an SEC decision on the board’s sanctions."
Board members Bill Gradison, Charles D. Niemeier, and Steven B. Harris supported requesting the change to the act as proposed by Goelzer.
During the meeting, Director Claudius B. Modesti, director of the PCAOB's division of Enforcement and Investigations, strongly supported public enforcement proceedings. "Nonpublic disciplinary proceedings are a major stumbling block for the PCAOB enforcement program to most effectively protect investors and improve audit quality," he said.
Statements from Goelzer, Gradison, Niemeier, Harris, and Modesti are available on the PCAOB Web site.