The Public Company Accounting Oversight Board is considering whether to bolster its regulations to guide audit-firm reviews of the work that their individual auditors do for client companies. The board also may come up with a new approach to PCAOB policing of auditor abuses.

Under its current rules in this area — all adopted as so-called interim standards from predecessor groups when the board was created under the Sarbanes-Oxley Act — the PCAOB does offer some guidance to an audit partner in overseeing his or her assistants during an engagement. The board’s rules, however, do not address how the firm’s management should review and manage the work of engagement partners. Nor does existing guidance explicitly lay out how the PCAOB should sanction accounting firms if they fail to “reasonably supervise” an individual auditor who violates securities laws, as Sarbox dictates.

The 2002 law requires that firms’ supervisors and others associated with a firm be held responsible if they believe an audit was deficient or someone acted inappropriately and they did nothing about it, explained Columbia Law School professor John Coffee during the PCAOB’s Standing Advisory Group meeting on Wednesday.

The PCAOB has found fault with supervision processes at the firms it has inspected over the past five years. In December, for example, the PCAOB fined Deloitte & Touche $1 million for not following its standards during a 2003 audit of a pharmaceutical company. The board also determined that the former Deloitte partner who led the audit team was incompetent. The auditor, James Fazio, settled the PCAOB’s charges and is barred form being associated with a public accounting firm for two years. The PCAOB concluded that Fazio failed to comply with the auditing standards requiring him to “exercise due professional care, exercise professional skepticism, obtain sufficient competent evidential matter … and supervise assistants.”

Members of the PCAOB’s advisory group encouraged the board to explain that firm managers, including the CEO, above an engagement partner should be held equally responsible. John Kellas, chairman of the International Auditing and Assurance Standards Board, suggested the PCAOB consider adopting one of his group’s standards that clearly shows that responsibilities for audit supervision go beyond just the leaders of a an engagement. The PCAOB is also considering the rules that govern the responsibilities of supervisors at broker/dealer firms.

Some type of framework would at least help audit firms be consistent in their supervision policies and for knowing what the PCAOB expect from them, said Cynthia Richson, director of corporate governance for the Employees Retirement System of Texas.

However, the existing standards may not be the root of confusion for the firms, suggested Damon Silvers, associate general counsel for the AFL-CIO. Rather, the issues that arose in the corporate scandals earlier this decade had to do with the implementation of the standards and the firms’ “tone at the top” culture, he noted.