William McDonough, the head of the Public Company Accounting Oversight Board, issued his first public policy address this week, and his tone left no question about his approach to oversight.

"I expect that you, as members of a regulated profession, know what the rules are. I expect that you are following those rules, both in their letter and their spirit," McDonough told a group at a conference of the Foundation for Accounting Education of the New York State Society of Certified Public Accountants.

"If you depart from those expectations -- that is, if you break the rules, if you ignore the spirit of the law even while meeting the letter -- woe be unto you. There will be consequences, and they will be grave," McDonough said.

The PCAOB will be inspecting all accounting firms which will be auditing public companies. "We will pry into your records and your work habits, and, yes, the rules will change," McDonough said.

Mr. McDonough indicated that he is committed to helping the profession restore its reputation, which he admitted was tarnished by a few rogue members. "I would not be here as [PCAOB] chairman, if the accounting profession had not already been weighed and found wanting."

Mr. McDonough reminded the participants that the deadline is here for firms to be registered with the PCAOB. Non-registered firms will be prohibited from auditing public companies.