In June 1979, Time magazine ran a cover story titled “Summer of Fear,” a comprehensive feature examining how, after years of hibernation, the classic horror picture had successfully wended its way back to theater screens.

The cover featured a photo of actress Sigourney Weaver cowering in a cramped alcove from a menacing slime-covered creature in a scene from the movie Alien. That year alone, moviegoers were treated to classics like Halloween, and one that spawned about 5,000 sequels - Friday the 13th.

Now, 24 years later, it may turn out to be a new summer of fear - especially for the Big Four and many of the major firms.

After a beginning that made a Mack Sennett comedy look organized and competent, the Public Company Accounting Oversight Board is gearing up to conduct inspections of accounting firms that audit public clients, with the Big Four slated to be first on deck this summer.

Last month was a busy one for the oversight body created via the passage of Sarbanes-Oxley. After distancing itself from the embarrassment of the appointment of William Webster as chairman, whose tenure lasted just slightly longer than an over-sexed camper in the above-mentioned Friday the 13th, the Securities and Exchange Commission got sort of serious about this whole reform thing and named Federal Reserve executive William McDonough as chair. The same week, the regulator appointed national auditing expert Douglas Carmichael to be the board’s chief auditor.

Following the appointments of McDonough and Carmichael, the PCAOB surprised almost no one by announcing its decision to develop auditing and other professional standards for accounting firms with SEC clients. That, in polite terms, told the American Institute of CPAs and its Auditing Standards Board that their services would no longer be required.

That decision was akin to Michael Meyers, the murderous character from Halloween, plunging his oversized knife into the lobbying balloon of the folks at 1211 Avenue of the Americas. The institute had lobbied furiously to maintain authority over auditing standards after Sarbanes-Oxley voided its self-regulatory authority.

But the profession will continue to have a seat at the standards table, only in a more muted capacity. In fact, theirs will be one of several voices advising the PCAOB on standards development. The board approved the creation of an “advisory committee,” a 15-to-30-member cadre, of which accountants will comprise roughly one third.

The board has plans to hire some 200 additional accountants to help conduct the inspections and will be funded via a $68 million budget, gleaned almost exclusively from “accounting support fees” levied on U.S. corporations registered with the SEC, and from mutual fund companies.

And it would be wise to keep checking the mailbox, because the board said that the invoices will begin mailing this month.

This summer may not have the frenzied edginess that Hollywood brought us in 1979, but if I were one of the Big Four at this juncture, I would be very afraid.

Bill Carlino

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