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 The Public Company Accounting Oversight Board's plan has been
largely dormant since it was fist suggested in October 2011.
The proposal became a talking point for debate again earlier this
year after veteran KPMG auditor Scott London pleaded guilty to
allegations he passed confidential details about companies he
audited to a friend who used them to make profitable trades.
The accountant admitted he gave jeweler Bryan Shaw inside
information regarding at least 14 earnings announcements or
acquisitions by KPMG clients, including Herbalife Ltd and United
Rentals Inc. Shaw also pleaded guilty in the case.
When the company initially disclosed it had parted ways with London
and two corporate audit clients, however, his identity at first
remained a mystery.
Critics said at the time that, had the PCAOB proposal been in place,
his name would have been disclosed much sooner.
Such information, they said, would have been helpful for
shareholders of other companies whose books London audited.
The PCAOB's original 2011 plan called for new rules requiring audit
firms to name the engagement partner in audit reports, as well as in
annual report forms.
It also called for other transparency measures to address cases in
which an accounting firm does not perform 100 percent of the work on
an audit. This included requiring audit firms to disclose who else
participated in the audit if the work exceeded a certain amount of
time.
The Big Four audit firms, KPMG, PricewaterhouseCoopers, Deloitte &
Touche and Ernst & Young, have opposed naming audit partners, saying
it would be of little use to investors, could increase legal
liability and deter auditors from tackling high-risk audit jobs.
The PCAOB, a board created by Congress in the 2002 Sarbanes-Oxley
Act in the wake of major accounting scandals, plans to re-propose a
tweaked version of the 2011 plan at an open public meeting on
Wednesday morning.
It was not immediately clear exactly how the new version would
differ from the original, although it is still expected to require
the name of the partner to be disclosed in the audit report.
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VOTE ON BROKER AUDITS
In addition to reproposing the disclosure of the audit partner's
identity, the PCAOB also plans to put the final touches on rules
governing the audits of securities broker-dealers.
Prior to the 2010 Dodd-Frank Wall Street reform law, the PCAOB only
had authority to inspect and write standards for auditors of public
companies.
Congress expanded that authority to include auditors of
broker-dealers in the wake of the scandal caused by Bernard Madoff's
$65 billion Ponzi scheme.
Madoff managed to dupe investors for many years in part thanks to
his auditor, David Friehling of Friehling & Horowitz, who operated
his firm from a strip mall in New City, New York. Friehling pleaded
guilty in 2009 to fraud charges, but claimed he did not know Madoff
was running a Ponzi scheme.
The PCAOB adopted major reforms in October specifically aimed at
auditors of broker-dealers that hold custody of client funds. These
include requiring them to conduct internal control reviews and
ensuring compliance with net capital rules.
Wednesday's final rules will expand the current requirements for
public company auditors to include broker-dealer auditors.
[REUTERS MEDIA; By
Sarah N. Lynch]
(Reporting by Sarah N. Lynch; editing by
Andre Grenon)
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