Friday, June 3, 2011

PCAOB Reforms Included in Investor Protection Act

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The exemption from SOX auditor attestation requirements for small businesses got most of the attention when the House Financial Services Committee approved the Investor Protection Act (H.R. 3817) Nov. 4. 

But the House bill also includes amendments to the authority of the Public Company Accounting Oversight Board. During a Nov. 16 speech, Securities and Exchange Commission Chief Accountant James Kroeker highlighted the changes as priorities for the SEC. 

The bill would make it clear that the PCAOB has the authority to inspect auditors of broker-dealers. These auditors already are required to register with the PCAOB, but the agency's ability to perform audits and take enforcement actions has been in doubt, according to Kroeker.  

The bill also seeks to improve PCAOB's oversight of foreign auditors of issuers in U.S. capital markets, by giving the PCAOB specific authority to exchange confidential information with foreign-based auditor oversight boards.   The lack of authority has created problems for the PCAOB in working with European audit oversight entities, in particular, Kroeker said.

Similar language is also included in Senate Banking Committee Chairman Christopher Dodd's (D-Conn) mammouth financial reform bill, Kroeker said.

On the auditor attestation requirements, HR 3817 was amended by the committee to exempt permanently companies with a market capitalization of less than $75 million from the Sarbanes-Oxley Act requirement that auditors attest to management's declaraction that their internal controls over financial reporting are effective.  The issue is controversial, and may get excised as the legislation moves through the House and Senate.

--Susan Webster, Managing Editor, Accounting Policy & Practice Report

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