If PCAOB inspection proceedings weren't yet private enough, the U.S. Court in Western Missouri has given them a little more protection.

In hearing a class action suit related to Sprint Nextel Corp., the court determined that any material prepared for or received by the PCAOB in connection with an inspection is privileged, and therefore need not be handed over as evidence when requested as part of any legal proceeding. The PCAOB's inspection process and enforcement proceedings are private under Sarbanes-Oxley, although even the PCAOB would like to see the proceedings become more public. The board publishes a final report on its inspection findings for each firm, but does not to identify companies whose audits are described as problematic and is prohibited from publishing quality control criticisms.

In the lawsuit, plaintiffs subpoenaed KPMG, Sprint Nextel's audit firm, to produce documents related to its PCAOB inspection that might support claims of accounting irregularities in 2006 and 2007 associated with the merger of Sprint and Nextel. According to Thomas O. Gorman, a partner with the law firm Dorsey and Whitney, the court listed exactly which documents it regards as privileged: any direct communication between PCAOB inspectors and an audit firm it is inspecting; forms labeled “PCAOB Inspection Comment Form,” including board comments and firm responses and drafts; spreadsheets of data prepared for the board in the course of an inspection; materials that would reveal specific questions or inquiries from the PCAOB as well as drafts and final versions of responses; any materials that would reveal specific questions or inquiries from the PCAOB, plus the drafts and responses; all versions of the engagement profile; and the presentation file for the inspected firm's initial presentation with the board.

Interpreting the protections provided under Sarbanes-Oxley, the Western Missouri decisions says the statute provides privilege for two circumstances, according to Gorman. It cover requests directly to the PCAOB for documents related to inspections, but it also covers requests to the firms that are targeted by the Board for inspection. The court said the privilege extends to KPMG because it “protects those who are under investigation from being required to divulge their responses to that investigation.” However, the court noted the privilege does not extend to documents from the underlying transaction or work. Gorman said the court rejected KPMG's claim that its materials revealing some aspect of its deliberation should also be protected.