Accounting Board Issues Rules on Its Inquiries
The new U.S. accounting oversight board on Monday approved rules governing its investigations of accounting firms, including letting the board keep probes confidential.
The Public Company Accounting Oversight Board voted unanimously to issue the proposed rules. If approved by the Securities and Exchange Commission, the board’s plan would replace the peer review that accounting firms have used to police themselves for decades.
For the record:
12:00 a.m. Oct. 1, 2003 For The Record
Los Angeles Times Wednesday October 01, 2003 Home Edition Main News Part A Page 2 1 inches; 49 words Type of Material: Correction
Accounting oversight rules -- An article in Tuesday’s Business section incorrectly reported that the Public Company Accounting Oversight Board had adopted new rules governing its routine inspections of accounting firms. The new rules apply only to oversight board investigations that are conducted when wrongdoing is suspected at a firm.
As required by the 2002 Sarbanes-Oxley corporate governance law, which created the oversight board, critical inspection reports about accounting firms won’t be made public unless an accounting firm failed to correct deficiencies within 12 months.
Board Chairman William McDonough has said the confidentiality provision would ultimately make for better audits because firms would be able to fix their deficiencies outside the glare of public scrutiny.
The board would conduct yearly inspections of all accounting firms that audit more than 100 publicly traded companies, according to the proposed rules. Smaller accounting firms would be inspected every three years. Special inspections could be conducted if the board or the SEC chose.
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