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PCAOB Signals More Enforcement, Fee Increase in 2011

Tammy Whitehouse | November 24, 2010

The Public Company Accounting Oversight Board has signaled through its 2011 budget that it is beefing up its enforcement staff to handle an increasing caseload. The board also signaled that public companies can expect a 5.4-percent increase in the support fee they will pay in 2011 to help fund the operations of the PCAOB.

With a slate of lame duck board members at the helm, the PCAOB has approved a five-year strategic plan and a 2011 fiscal year budget of $204.4 million. That represents an increase of 11.5 percent over the current year. Public companies would pay a support fee of $187.9 million, divided among them according to their market capitalization. That's a 5.4-percent increase over the $178.1 million that was to be assessed under the 2010 budget.

Brokers-dealers who are registered with the Securities and Exchange Commission would pay an additional $14.4 million, assessed according to their net capital. The Dodd-Frank Wall Street Reform and Consumer Protection Act put the PCAOB in charge of overseeing registered broker-dealers, so the PCAOB is seeking additional resources to fund the new responsibility.

The PCAOB said it will use the added funds to beef up staffing, information technology, and facilities. The board is gearing up in part to handle an increasing workload for its enforcement staff. By law, enforcement actions at the PCAOB are private until settled, so the PCAOB does not provide data on how many or what types of cases are in the investigation and enforcement pipe line.

The board provided a hint, however, that the caseload is growing, with plans to add seven staff members for enforcement. “The Division of Enforcement has a full docket of investigations, and a significant number of those investigations are likely to lead to charges against firms or individual auditors,” said Acting Chairman Daniel Goelzer. “The Division expects that many of those cases will be litigated.”

The PCAOB also is gearing up to oversee broker-dealers and to implement some enhancements to its inspection process, especially in documentation. Goelzer said the new procedures will strengthen the inspection program, but at the same time will demand new resources, especially for inspections at the largest audit firms. The board wants to hire 15 new people in its registration and inspections division to meet the new demands.

PCAOB member Steve Harris, the only board member currently serving in his own unexpired term, said he's comfortable the new strategic plan and budget will not bind any prospective new board members into decisions made by the current panel. Goelzer, whose regular term continues into 2011, agreed the future board majority shouldn't feel constrained. “This plan is intended to be flexible, and nothing in it limits the next board's choices,” he said.