At
House Capital Markets Subcommittee hearings on the tenth anniversary of th
enactment of the Sarbanes-Oxley Act, Mercer Bullard, CEO of Fund Democracy,
urged Congress to amend Sarbanes-Oxley to require that PCAOB proceedings be
public except by order of the Board. Section 105
of Sarbanes-Oxley permits PCAOB
proceedings to be public only if the PCAOB finds good cause and both sides consent which, in the view of
Professor Bullard, as a practical matter, ensures that these proceedings will
never be made public. He noted that secret proceedings improperly deny the
public, including issuers’ audit committees, material information regarding auditors,
and increase auditors’ incentives to litigate actions. PCAOB enforcement
proceedings should be public, he emphasized, just as SEC proceedings have been
for 25 years.
Senators
Jack Reed (D-RI) and Charles Grassley (R-Iowa) have introduced legislation
making PCAOB disciplinary proceedings public to bring auditing deficiencies at
the audit firms or the companies they audit to light in a timely manner and
help deter violations. The PCAOB Enforcement Transparency Act, S 1907, would make hearings by the PCAOB, and
all related notices, orders, and motions, open and available to the public
unless otherwise ordered by the Board. The Board procedure would then be
similar to the SEC's Rules of Practice for similar matters, where hearings and
related notices, orders, and motions are open and available to the public.
There is a companion bill in the House, HR 1503.