Washington (June 30, 2003) -- The accounting oversight board has approved strict ethics rules for its board and staff -- in an apparent effort to stave off any future conflicts of interest that could impede the group's work.
In a flurry of announcements issued Monday, the Public Company Accounting Oversight Board also adopted a new rule for seeking help from outside experts in the financial markets -- including working auditors and accountants, to help the board carry out its work.
Both rules must be approved by the Securities and Exchange Commission before they can take effect.
The board's stringent ethics code for all board members and staff leaves no stone unturned. With few exceptions, the rule disallows anyone on the board or staff from either owing, or being owed any money from any "former employer, business partner, publisher or client."
Members of the board and their spouses and dependents are also prohibited from receiving any profit or payments from a public accounting firm, other than proceeds from an already established retirement plan.
In addition, board members and staff must avoid investments "that affect or reasonably create the appearance of affecting their independence or objectivity."
PCAOB board and staff must annually disclose their stock holdings, and are disqualified in participating in any board activity that affects investments owned by them or their family members. They are also forbidden to accept any other employment outside of service to the board, even volunteer work if it interferes with their responsibilities to the board or creates a "reasonable appearance of a conflict of interest."
"On the positive side, they want to send the message that anybody working for them is squeaky clean, but I don't think they'd be going there without the fiasco of (former PCAOB Board Chair William) Webster," said industry consultant Allan Koltin, president of PDI Global. Webster resigned as chair of the board after it was learned that he served as audit chair of a public company being investigated for accounting irregularities.
Koltin added that he felt the rules as they related to volunteer work might be "just a bit of overkill."
"Part of why these people are who they are is because they're active in their communities," he added.
The rule on the formation of advisory groups would enable the board to form one or more groups to help it carry out its responsibilities under the Sarbanes-Oxley Act. A standing advisory group would consist of about 25 members, including practicing auditors, financial statement preparers, the investor community, state accounting regulators, academics and others selected by the board from either nominations sent to them, or self-nominations.
The SAG's first chair will be Douglas Carmichael, the PCAOB's chief auditor and director of professional standards who will prepare the group's meeting agendas, oversee meetings and act as liaison to the board. SAG will hold at least two open meetings per year and any recommendations will be made to the board at an open meeting sometime during the year.
-- Tracey Miller-Segarra
