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Two bi-partisan senators have revived their efforts to end the secrecy surrounding PCAOB disciplinary proceedings, arguing that the legislation is necessary to give the public and investors timely, critical information.
Senate Bill 610— PCAOB Enforcement Transparency Act of 2017—is at least the third attempt by Sens. Jack Reed (D-R.I.) and Chuck Grassley (R-Iowa) to introduce such legislation. They last introduced a bill in April 2015, following efforts in 2013 and 2011. Grassley is on the Finance Committee, which has jurisdiction over the PCAOB. Reed is on the Banking Committee, which also has jurisdiction.
Currently the PCAOB’s hearings are nonpublic, through final appeal to the SEC. The Sarbanes-Oxley Act requires the PCAOB’s disciplinary hearings to be nonpublic, unless the board finds good cause for a hearing to be public and each party consents to public hearings.
PCAOB Chairman James R. Doty told Bloomberg BNA, in a Mar. 21 email, “I appreciate the continued support of Chairman Grassley and Senator Reed to bring transparency to litigated PCAOB enforcement proceedings to better protect investors.”
The revived law would bring the Public Company Accounting Oversight Board into alignment with public enforcement proceedings of other regulators, including the Securities and Exchange Commission.
Chip Unruh from Reed’s office, responding to a question as to why this version of a bill would succeed, where others have failed, told Bloomberg BNA Mar. 21 that there is “a new Chairman of the Banking Committee and he has expressed an interest in moving bipartisan, effective legislation. " Mike Crapo (R-Idaho) is Chairman of the Senate Committee on Banking, Housing and Urban Affairs, Sherrod Brown (D-Ohio) is Ranking Member. Unruh said they planned to “continue to work with Chairman Crapo and Ranking Member Brown and our colleagues as they consider future bills.”
Unruh said that he was unaware of support for a companion bill in the House.
“Transparency brings accountability,” Grassley said in a Mar. 21 release. “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.”
Reed said, “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.”
As Doty testified in 2012 testimony at earlier effort to make disciplinary proceedings public, auditors and audit firms charged with violating the laws " have little incentive to consent to opening the case against them to public view, and in fact, none have ever done so.”
Bloomberg BNA could not get a response from an auditor on whether allowing the PCAOB’s allegations to be made public early on would unfairly damage the auditor’s reputation.
To contact the reporter on this story: Laura Tieger Salisbury in Washington at LSalisbury@bna.com
To contact the editor responsible for this story: S. Ali Sartipzadeh at email@example.com
Information on the S 610 PCAOB Enforcement Transparency Act of 2017 is at https://www.congress.gov/bill/115th-congress/senate-bill/610
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