By Frank Byrt
A US House panel is investigating whether the Public Company Accounting Oversight Board (PCAOB), the nation's chief public company audit overseer, is doing enough to incorporate economic factors into new regulations it is proposing.
In a January 10 letter to the PCAOB, Darrell Issa, chair of the House Oversight and Government Reform committee, and committee member Patrick McHenry, expressed concern that the PCAOB is not taking sufficient "action to comply with the broad consensus that economic analysis is a critical element of credible regulatory policy", Reuters reported.
The letter added that in the committee's review of internal PCAOB documents, it appeared there is an "institutional resistance to rigorous economic analysis", and it demanded that the PCAOB hand over other records involving any of its internal communications on the subject by January 24.
In a response to a request for comment on the issue by AccountingWEB to the PCAOB, an organization spokesman e-mailed that: "We appreciate the continued interest of Chairman Issa and Rep. McHenry in our ongoing efforts to further integrate economic analysis with PCAOB rulemaking. We look forward to addressing their questions."
The message also noted that in its long-term strategic plan that goes out to 2016",the PCAOB expects to continue to devote significant time and resources to preparing analyses to assist the Securities and Exchange Commission in making JOBS Act determinations, as well as continuing as to explore ways to further incorporate economic analysis into its rulemaking processes."
In addition, PCAOB Chairman James Doty, speaking at an AICPA National Conference that focused on SEC and PCAOB issues in Washington, DC, December 3, 2012, said "economic analysis can help us in this review of the PCAOB's standards-setting framework. Economic analysis prompts us to ask critical questions: What is the problem? What are our alternatives, both to rulemaking and by rulemaking? What is the most cost-effective solution for society?" A transcript of Doty's speech is posted on the PCAOB website.
The PCAOB was created by the Sarbanes-Oxley Act of 2002. The nonprofit corporation was established by Congress to oversee the audits of public companies in order to protect investors and the public interest by promoting informative, accurate, and independent audit reports
The criticism by the House panel is but the latest controversy for the PCAOB, as it has been considering whether to propose new rules that would impose term limits on audit firms in order to boost auditor independence. But the Big Four audit firms – PricewaterhouseCoopers, KPMG, Deloitte LLP, and Ernst & Young LLP – have strongly protested the proposal.
And Congressional conservatives and the US Chamber of Commerce have also raised questions over whether PCAOB has appropriately weighed the costs and benefits of many of the new rules it has proposed.