PCAOB Wants Auditor Misdemeanors Made Public
The Public Company Accounting Oversight Board is asking auditing firms who register with the PCAOB Board to divulge information on auditors who have committed misdemeanor offenses of any kind in the past five years. If it gets its way, the PCAOB will have these auditor indiscretions published on the PCAOB Web site as a "public service".
Firms are balking at the requirement, insisting that an individual's criminal record on misdemeanor charges doesn't affect auditing standards and may well be a violation of individual privacy laws.
"We all make mistakes in life, and not to forgive somebody for a mistake five years ago, and then make it a public record, is a little scary," said Edward Nusbaum, chief executive officer of Grant Thornton LLP, the fifth-biggest U.S. accounting firm. "It just seems a bit extreme to me."
Additionally troubling, according to Bloomberg News, is the request to turn over information to the Board about pending charges which have not yet gone to trial. Sarbanes-Oxley requires disclosure of civil or criminal proceedings "pending" against the firm or its accountants "in connection with any audit report."
A link has yet to be made between Enron-like audit failures and a misdemeanor conviction five years ago of trespassing or driving while intoxicated - or any of a series of other misdemeanor convictions.
"It's really just pandering to the public and the politicians," said David Gourevitch, a former New York prosecutor and ex-SEC enforcement lawyer. "Of the auditors that were involved in these corporate scandals, there is no suggestion that they had prior criminal convictions that contributed to failed audits."
The SEC is seeking public comments on this requirement through July 2 only.