This week, the Public Company Accounting Oversight Board proposed new rules for auditors as the organization created by the Sarbanes-Oxley Act continues its mission to oversee the audits of public companies and protect the interests of investors.
The new rules would permit the PCAOB to conduct investigations "concerning any act or practice, or omission to act, by a registered public accounting firm or person associated with such a firm that may violate any provision of the [Sarbanes-Oxley] Act, the rules of the Board, certain provisions of the securities laws, or professional standards."
The PCAOB proposes that rules violations should be dealt with first with a hearing, and then sanctions. In addition, the PCAOB proposes that it will have the authority to recommend remedial actions, including training, quality control monitors, or the appointment of an independent monitor.
The Act protects the privacy of accountants with a provision that prevents the PCAOB from making public the problems found in its investigations, if said problems are corrected within 12 months. Some board members, however, are encouraging corporate directors to ask their auditors to divulge the PCAOB inspection reports, which would effectively circumvent the 12-month rule.
The rules also include provisions for two kinds of inspections of registered public accounting firms. Regular inspections would occur annually or triennially, and would include reviews of selected audit and review engagements as well as an evaluation of the firm's quality control system. Special inspections would focus on particular issues as required for a particular authorization or request.
The new rules include a provision for registered accounting firms to request a withdrawal of their registration with the PCAOB. Previous rules provided for registration procedures but did not include procedures for withdrawing a registration.
These proposed rules are available for public comment until 5 p.m. August 18, 2003. You can read the complete text of the rules by following the links below.
- Proposed rules on investigations and adjudications
- Proposed rules on inspections of registered public accounting firms
- Proposed rules on withdrawal from registration
Submit written comments to:
Office of the Secretary
1666 K Street, N.W.
Washington, D.C. 20006-2803
Comments may also be submitted by e-mail to [email protected].