An internal review of the enforcement and investigations function at the Public Company Accounting Oversight Board concludes the biggest obstacle to a more effective process is privacy.

The board's Office of Internal Oversight and Performance Assurance conducted a review in conformance with government auditing standards to determine if the board's Division of Enforcement and Investigations facilitated timely investigations and disciplinary procedures consistent with the Board's strategic plan. The review concluded the processes and procedures are as effective as the law will allow, but the biggest obstacle to more timely enforcement action is the privacy required under Sarbanes-Oxley.

PCAOB investigations and disciplinary proceedings are non-public under Sarbanes-Oxley until settled or until the parties facing action consent to an open process. That hampers the process by giving firms and individuals an incentive to litigate cases regardless of merit, simply to delay a settlement, limiting the board's ability to use enforcement as a tool to improve audit quality and deter violations, the report says. The privacy around enforcement and disciplinary proceedings also denies the public access to information about PCAOB cases and makes it impossible for those outside the process to assess its effectiveness.

The PCAOB has asked Congress to change the law to allow its disciplinary proceedings to be public, and the House and Senate are working on bipartisan measures to open the process to public view. “The board looks forward to working with Congress to pass this important legislation that would benefit both investors and the auditing profession,” wrote PCAOB Chairman James Doty in a letter to Mary Schapiro, chairman of the Securities and Exchange Commission, accompanying the report. Doty lamented that the board has built an active enforcement program, but no one can see it.

The report notes other measures the division can take to become more effective and timelier, such as streamlining document reviews and other case-related workflows, delegating additional responsibilities internally, developing additional strategies for internal communication on cases, and conducting additional training for staff. Doty said plans are under way to implement those suggested improvements.

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