U.S. Audit Watchdog to Ramp Up Enforcement, New Chairman Says
James R. Doty, the new head of the board that oversees auditors of U.S.-registered companies, said he expects the panel to ramp up the scale and number of its enforcement actions.
Doty, 70, who took over as the chairman of the Public Company Accounting Oversight Board last week, said that the board -- which was established eight years ago -- has been building its capacity to scrutinize auditors certifying companies’ books.
“We’re going to be litigating bigger cases, and there are going to be more cases litigated, because we have a bigger pipeline,” Doty said in an interview today. “We’re now further along in the process of developing inspection and enforcement.”
Doty, who was general counsel of the SEC in the 1990s, said the board would act quickly to hire a new director of inspections as well as more inspectors.
The PCAOB, created in the aftermath of Enron Corp.’s accounting scandal, sets standards for auditors certifying the books of companies with U.S.-registered securities. It is responsible for holding 2,500 registered firms to those rules. Its work is overseen and authorized by the SEC.
From 2006 until last year, the board’s work was hampered by a lawsuit challenging its constitutionality. In June, the U.S. Supreme Court ruled narrowly in favor of the board.
In its history, the PCAOB has resolved 36 enforcement cases, most of them by settling, said board spokeswoman Colleen Brennan. Only two were adjudicated, she said.
On Monday -- less than a week after Doty began work -- the board announced the retirement of George Diacont, director of registration and inspection since the board’s beginning in 2003. Doty said that one of his first priorities is filling that position.
Doty said the board is also “going to ramp up” negotiations with other countries, to improve the board’s ability to inspect auditors working overseas, particularly in China. In January, the board announced an arrangement with the U.K. to allow such inspections.
Doty was appointed along with two other new board members: Jay D. Hanson, a former accounting partner at McGladrey & Pullen LLP in Bloomington, Minnesota, and Lewis H. Ferguson, formerly a partner at Gibson, Dunn & Crutcher LLP in Washington.
Their arrival brings the board to its full strength of five members. While the outcome of the Supreme Court case was uncertain, former board members stayed in office well past the expirations of their terms.
When it was founded, Congress decided that PCAOB member salaries would be commensurate with the private sector. As a result, pay for the panel’s five members far outpaces the norm for most government jobs. Doty earns $672,676, more than four times what Schapiro pockets as SEC chairman. Board members get $546,891, exceeding President Barack Obama’s $400,000 salary.
To contact the reporter on this story: Jesse Hamilton in Washington at email@example.com.