PCAOB

Congress isn’t noted for bipartisanship these days but there’s one thing senators from both parties agree on — Public Company Accounting Oversight Board disciplinary proceedings should be public.

Senators Jack Reed (D-R.I.) and Chuck Grassley (R-Ia.) have teamed up to reintroduce the PCAOB Enforcement Transparency Act, arguing that the current secrecy of the board’s disciplinary proceedings benefits accounting firms that engage in misconduct.

“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,” Grassley said in a news release.

The senators cited the case of an accounting firm that, while subject to a PCAOB disciplinary proceeding, continued to issue no fewer than 29 additional audit reports on public companies without any of those companies knowing about the proceedings.

“Disturbingly, investors and the public company clients of that audit firm were deprived of relevant information about the proceedings against the firm and the substance of any violations,” the senators said.

The Reed-Grassley bill would put PCAOB proceedings on the same public footing as those of the Securities and Exchange Commission, making board and all related notices, orders, and motions, open and available to the public unless otherwise ordered by the board.

“Reliable financial reporting is vital to the health of our economy and we must take the legislative steps necessary to enhance transparency in the PCAOB’s enforcement process,” Reed said. “Currently, Congress, investors, and others are being denied critical information about an auditor’s disciplinary process.”

The 2002 Sarbanes-Oxley law creating the board also required disciplinary proceedings to be kept confidential through charging, hearings, initial decision, and appeal. Efforts to make proceedings public began in 2011 when Reed and Grassley introduced a bill at the urging of then-board chairman Daniel Goelzer.

The latest transparency measure has the support of the board. “I appreciate the continued support of Chairman Grassley and Senator Reed to bring transparency to litigated PCAOB enforcement proceedings to better protect investors,” PCAOB Chairman James Doty said.

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