Sen. Jack Reed, a Rhode Island Democrat, on June 10, 2021, reintroduced legislation to allow the PCAOB to open up its disciplinary proceedings to the public.
Reed and cosponsor Sen. Chuck Grassley, an Iowa Republican, have sought for the past decade to advance the PCAOB Enforcement Transparency Act, which would reverse a Sarbanes-Oxley Act provision that requires the proceedings to take place behind closed doors unless all parties agree to make them public.
The language of the bill (S. 2009) is unchanged from previous versions, according to a Reed spokesman.
Critics of open disciplinary proceedings say the current regime is necessary in a reputation-centric industry in which unproven charges could threaten a firm’s existence.
Proponents of the bill, however, argue that it would realign the PCAOB’s enforcement regime to more closely mirror the SEC’s own administrative actions against audit firms, and would better inform investors about current actions against a company’s auditors. Former PCAOB Chairman James Doty was a vocal supporter of the PCAOB Enforcement Transparency Act during his tenure at the board, arguing the current system is an ”anomaly” that obscures enforcement actions against bad actors.
Doty departed the board at the end of 2017, and was succeeded as chairman by William Duhnke, a senior Republican staffer in the Senate who was recently terminated by new SEC Chair Gary Gensler. The SEC is now seeking to fill all five PCAOB seats with new members, while facing pushback from Republican lawmakers angered by Duhnke’s firing. (See Appointment Process For PCAOB Seats Begins, But Republicans Seek to Investigate Removal of Trump-era Board Members in the June 10, 2021, edition of Accounting & Compliance Alert.)
This article originally appeared in the June 14, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.
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