Friday, August 06, 2010

SEC Chair Schapiro Asks for Recommendations in Filling PCAOB Seats

In a letter to senior federal officials, consumer, investor and business groups, and auditing associations, SEC Chair Mary Schapiro asked for recommendations as she leads the search to identify qualified candidates for the Chair and two members of the PCAOB. The letter was sent to Fed Chair Ben Bernanke and Treasury Secretary Tim Geithner, as well as to Acting PCAOB Chair Dan Goelzer. Ann Yerger, Executive Director of the Council of Institutional Investors, Cynthia Fornelli, Executive Director of the Center for Audit Quality and AICPA CEO Barry Melancon were also asked for recommendations. The letter was also sent to Chamber of Commerce CEO Thomas Donohue, Business Roundtable CEO John Castellani, Damon Silvers, AFL-CIO Director of Policy and Barbara Roper of the Consumer Federation of America. The period for providing recommendations expired on July 30, 2010.

According to the Sarbanes-Oxley Act, the Board’s organic legislation, two members of the PCAOB must be or have been a CPA. If one of those two members is the Chair, he or she may not have been a practicing CPA for at least 5 years. The Board currently has a CPA member whose term is continuing, noted the SEC Chair, and so, of the three positions to be filled, only one must be a CPA.

Sarbanes-Oxley also requires that Board members be appointed from among prominent individuals of integrity and reputation who have a demonstrated commitment to the interests of investors and the public, and an understanding of the responsibilities for and nature of the financial disclosures required of issuers under the securities laws and the obligations of accountants with respect to the preparation and issuance of audit reports with respect to such disclosures. In addition to the Sarbanes-Oxley requirements, noted the SEC official, the Commission considers other desirable experience and related criteria of candidates, including experience demonstrating a strong understanding of the role of auditors in the SEC’s financial accounting and disclosure system, the ability to be a fair regulator from the viewpoint of all participants in the financial markets, a proven record of independence and the ability to make unpopular decisions when necessary. The SEC also considers the ability and willingness of potential PCAOB members to serve the full term to which they are appointed.

In considering potential candidates, the SEC Chair asked the letter recipients to note that Board members must serve on a fulltime basis and may not be employed by any other person, engage in any other professional or business activity, or receive payments from a public accounting firm, other than fixed continuing payments under standard retirement arrangements. Also, candidates are subject to a background investigation and interviews by the Commissioners. Board appointments are made by a vote of the full Commission.