While law-makers and regulators hammer out the specifics of the new Public Accountability Board proposed by Securities and Exchange Commission (SEC) Chairman Harvey Pitt and endorsed by President Bush, the Big Five firms may catch a break on long-awaited reviews of their auditor independence systems.

Under a program started two years ago, the Big Five were directed to modernize their internal independence compliance systems according to a timetable set by the SEC. To provide public assurance that the systems improvements were completed on time, the firms agreed to a series of reviews by the Public Oversight Board (POB). But POB's subsequent decision to close its doors by the end of March leaves the reviews unfinished.

According to media accounts, POB Chairman Charles Bowsher has urged the SEC to find a way to complete the reviews as they were originally contemplated, notwithstanding an apparent change in the SEC's thinking. The change in policy was communicated in a letter sent to the Big Five in December 2001. In the letter, SEC's John Morrissey reportedly told the firms that, contrary to the original plan, the POB would not issue a public report that suggested improvements in a firm’s compliance and singled out any firm that didn't have its system up by June 30, 2001. The only exception: if an accounting firm's transgression was so egregious that it would fail a peer review.

With the peer review process slated for extinction as part of the SEC's proposed reform initiatives, Chairman Pitt has reportedly asked the firms for their recommendations as to next steps. "We appreciate Mr. Bowsher's comments and agree fully that it's important for this work to go forward," says SEC spokeswoman Christi Harlan.

Read POB Chairman Bowsher's letter to the SEC.

-Rosemary Schlank