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Photo courtesy of the PCAOB

Bill Would Make PCAOB Disciplinary Hearings Public

Mar 30th 2017
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In a renewed effort to make auditor disciplinary hearings conducted by the Public Company Accounting Oversight Board (PCAOB) public, Sens. Jack Reed (D-RI) and Chuck Grassley (R-IA) reintroduced the PCAOB Enforcement Transparency Act on March 13.

The legislation, SB 610, currently is in the Senate Banking, Housing, and Urban Affairs Committee.

The Reed-Grassley bill seeks to make PCAOB hearings, notices, orders, and motions public unless otherwise ordered by the board. The proposal would be similar to the US Securities and Exchange Commission (SEC) Rules of Practice, which makes hearings, notices, orders, and motions open to the public.

“Currently, Congress, investors, and others are being denied critical information about an auditor’s disciplinary process,” Reed said in a prepared statement. “Investors and companies alike should be aware when the auditors and accountants they rely on have been charged or sanctioned for violating professional auditing standards.”

Grassley stated that the bill “levels the playing field” between auditors reviewed by the SEC and those who face PCAOB scrutiny. 

“Currently, PCAOB proceedings are secret while SEC proceedings are not,” he said. “The secrecy provides incentives to bad actors to extend the proceedings as long as possible so they can continue to do business without notice to businesses about potential problems with a particular auditor.”

The bill, he added, “brings the kind of transparency that adds accountability to agency proceedings.”

The senators’ announcement cites an unidentified accounting firm under investigation that issued at least 29 audit reports on public companies without the companies’ knowledge of the PCAOB disciplinary proceedings against the firm. The announcement makes no mention of the procedural outcome.

The PCAOB’s closed hearings are counter to the public proceedings of other regulators, such as the SEC, US Department of Labor, Federal Deposit Insurance Corp., Commodity Futures Trading Commission, and the Financial Industry Regulatory Authority, the senators state.

The bill was first introduced in 2011 and reintroduced in 2015 as SB 1084, in an effort to amend Section 105(c)(2) of the Sarbanes-Oxley Act of 2002 concerning public hearings.

Late last year, PCAOB Chairman James Doty indicated his support of SB 1084. Speaking before the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, Doty commented about the problem of keeping the PCAOB’s proceedings private.

“The auditors and audit firms charged with violating applicable laws, rules, or standards have little incentive to consent to opening the case against them to public view, and in fact, none have ever done so,” he said at the time. “This state of affairs is not good for investors, for the auditing profession, or for the public at large.”

In a statement emailed to AccountingWEB about the latest effort, Doty said, “I appreciate the continued support of Chairman Grassley and Senator Reed to bring transparency to litigated PCAOB enforcement proceedings to better protect investors.”