The Move to Amend the Sarbanes –Oxley Act
The Sarbanes-Oxley Act which was implemented in July 2002 is on the threshold of being amended. The Public Company Accounting Oversight Board (PCOB) wants the amendment done so that the disciplinary measures taken on the defaulting auditors and firms become more transparent. PCOB wants the hearings to be done in public as done by the Securities and Exchange Commission (SEC).
Sarbanes-Oxley Act was enforced for introducing some critical changes in the regulatory measures pertaining to corporate governance and their financial practices. The Act has required the disciplinary proceeding not to be made public but to be conducted in private. This ‘secretive process’ is no longer being appreciated and Congress has already been sent the details of the draft bill which clearly demands that the hearings and proceedings should be made public.
Daniel Goelzer, the PCB chairman mentioned in his letter to the Congress that the defaulting parties were taking advantage of this act and dragging the proceedings for years. This was both time-consuming and unfair. He cited an example of three recent cases which took almost 17,000 hours to complete the entire proceedings.
The regulator expressed concern stating that because of the Act the public are not aware about the nature of defaults or problems associated with the accounting companies and firms. Goelzer reiterated that due to this ‘secrecy’ the violations are not highlighted to the public until the case is taken up by the SEC.
Goelzer pointed out that the defaulting companies were taking advantage of the ‘secretive hearing’ by describing how a firm Gately& Associates continued to practice public company audit even though a case was going on against it in private. It continued with its practice for almost two years till it was expelled by PCAOB on getting an affirmation by the SEC.