The acting chairman of the Public Company Accounting Oversight Board, Daniel L. Goelzer, plans to ask Congress to consider a change to the Sarbanes-Oxley Act to allow the PCAOBs disciplinary hearings of accountants and accounting firms, along with the related proceedings, to be made public.
Goelzer has directed the PCAOB staff to develop a proposal that will be sent to Congress requesting the change. Currently, under Sarbanes-Oxley, disciplinary hearings and proceedings are kept private, unless the PCAOB find good cause to make them public, and all the parties concerned agree to open them to the public. That rarely if ever happens.
I believe the time has come for us to ask Congress to change the law and make our disciplinary hearings public, unless there is some good reason for a particular matter to be closed, said Goelzer in a statement.
Public disciplinary hearings would conform to a long-standing practice at the Securities and Exchange Commission to provide public disciplinary hearings on matters regarding auditors.
However, under current law, firms and auditors litigating with the PCAOB have little incentive to consent to public proceedings and can prevent the proceedings from becoming public for long after the information would be most relevant to investors, other auditors, and interested parties.
No other auditor, investor, audit committee, or member of the media is entitled to know what the PCAOB considers to merit discipline, whom it has charged, what issues are being litigated, or whether the PCAOB staff has prevailed or not, said Goelzer. The public is in the dark about how the Board uses its enforcement authority until there is a settlement or an SEC decision on the Boards sanctions.
Board members Bill Gradison, Charles D. Niemeier, and Steven B. Harris supported requesting the change to Sarbanes-Oxley proposed by Goelzer. During the meeting, PCAOB enforcement and investigations director Claudius B. Modesti strongly supported public enforcement proceedings. Nonpublic disciplinary proceedings are a major stumbling block for the PCAOB enforcement program to most effectively protect investors and improve audit quality, he said.
