PCAOB in line of sequestration fire
One of the enduring legacies of Sarbanes-Oxley is the Public Company Accounting Oversight Board (PCAOB), which was tasked with overseeing the audit industry in the wake of the Enron collapse. That event eventually led to the "death penalty" for one-time accounting firm Arthur Andersen.
After more than a decade, the PCAOB faces a huge challenge from another law, the one that made "sequestration" a household term. As things stand now, according to Reuters, the Office of Management and Budget has ruled that the PCAOB should face an $18 million cut. To put that in perspective, the approved PCAOB budget this year was slated at $245.6 million budget for the PCAOB. So we're talking about a 7 percent cut.
That might not seem like the end of the world, but it would result in significant impacts to the ambitious plans by the board to better regulate audit firms and effect significant change in the audit and reporting process. All that will not be cheap, and a cut of this magnitude all at once would be tough to digest. Programmatic cuts would be inevitable.
The PCAOB has protested the move. "We are not a part of the federal government," said PCAOB Chairman James Doty. The government's position "is simply wrong and flies in the face of clear statutory language."
The board is financed by fees from corporations, though its budget is listed via the SEC's. In the end, sequestration will hopefully die, which would solve the board's budget woes. But you can't really count on that right now.
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