Senators Jack Reed (D-RI) and Chuck Grassley (R-IA) introduced a bill in 2011 that would make PCAOB disciplinary proceedings public. Like many bills in this political climate, it went precisely nowhere.
Reed and Grassley, not unfamiliar with the excruciating pace of the legislative process, are gonna try to get some momentum behind this idea again by re-introducing the bill again:
“The PCAOB is responsible for ensuring that auditors of public companies meet the highest standards of quality, independence and ethics,” Reed said in a statement last week. “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. Currently, Congress, investors and others are being denied critical information about an auditor’s disciplinary process. 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.”
The Reed-Grassley bill would make PCAOB hearings and all related notices, orders and motions open and available to the public unless otherwise ordered by the board. The PCAOB procedure would then be similar to SEC Rules of Practice for similar matters, where hearings and related notices, orders and motions are open and available to the public.
“Transparency brings accountability,” said Grassley. “This legislation levels the playing field between auditors reviewed by the SEC and auditors reviewed by the PCAOB. Currently, PCAOB proceedings are secret while SEC proceedings are not. 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. This bill ends the secrecy and brings the kind of transparency that adds accountability to agency proceedings.”