As members of the new Public Company Accounting Oversight Board (PCAOB) settled into their new offices, one of the first pieces of mail they received was a letter signed by three former chief accountants of the Securities and Exchange Commission (SEC). All three urged the PCAOB to take audit standards away from the American Institute of CPAs (AICPA).
The former SEC officials, Walter Schuetze, Michael Sutton and Lynn Turner, described the AICPA's audit standards as "well-intentioned." But, they wrote, "the inherent conflicts between protecting auditing firms' interests and those of the investing public have resulted in standards tilted to favor the interests of auditors."
Additionally, the former chief accountants asked the oversight board to set auditor independence standards and make sure its quality and control inspections of accounting firms are handled by board staff, not by accounting firms or outside contractors.
The agenda for PCAOB's January 9th meeting includes consideration of adopting a budget, discussion of hiring an interim staff director, and consideration of a proposal for the National Association of Securities Dealers to aid the board in registering accounting firms.
After the basics are in place, the next issues the board will likely address include auditing and independence standards. The Sarbanes-Oxley Act gives the PCAOB the authority to set the standards or to delegate the responsibility. The AICPA currently sets the standards and would like to continue to do so.