GAO Says SEC Could Take a Lesson From FASB
The report was requested by the Senate Banking Committee after a process breakdown led to the resignations of the chairmen of the Public Company Accounting Oversight Board (PCAOB) and the Securities and Exchange Commission (SEC), as well as the SEC's chief accountant.
A key recommendation is that, before any additional PCAOB members are appointed, the SEC commissioners and staff should agree on the process to be followed and establish detailed selection criteria.
As a possible role model, GAO suggests the process used by the Financial Accounting Foundation (FAF), the organization that selects the members of the FASB. In addition to knowledge of financial accounting and reporting and an awareness of the financial reporting environment, GAO's report says, FAF's selection criteria include such skills as critical thinking, communication, and interpersonal skills.
Former Chief Accountant Robert Herdman said he had been trying to follow the FAF's approach in some ways, such as appointing a "balanced" board, representing a variety of constituencies and ideologies. Unfortunately, concludes the report, one big difference between two was that the SEC's approach was not as well-communicated as FAF's. The failure to communicate agreed-upon criteria to the Commission and the public led to a general lack of agreement and open dialogue about the issues, and this in turn hampered the Commission's ability to reach a consensus and raised speculation about the integrity of the process.
Download  the full report.