The Public Company Accounting Oversight Board approved a hefty $152.8 million operating budget for itself for 2005 - an increase of roughly 50 percent that would allow the oversight body to expand its staff and step up its inspections of audit firms.
Under the new budget, the organization will engage in "an aggressive recruiting effort to hire experienced auditors," and by the end of 2005, the total inspection staff is expected to rise to a total of 220, according to PCAOB chief financial officer Thomas Hohman.
But even with that number, which translates into a 70 percent boost in manpower, the board's inspection staff could be stretched thin next year.
"We would like more [experienced auditors on the team], but we recognize this is a very tight employment market," Hohman said in his outline of the budget plan to the five-member board.
The PCAOB's 2004 budget is $103 million.
To achieve these recruiting goals, the board must be in a position to offer "outstanding" career advancement opportunities, as well as salary and benefits that are competitive with the private sector, human resources director Sara Bridwell said.
Those same sentiments were echoed by PCAOB chairman William McDonough, who expressed appreciation for Congress' decision to allow the board to set staff salary levels high enough to recruit top prospects.
"In these formative years for the PCAOB, it is critically important that we command the respect and confidence of the investing public," McDonough said. "We can do so only by building the organization with a highly skilled and experienced staff capable of exercising good judgment."
Concluding that the PCAOB would not be able to fulfill its Sarbanes-Oxley Act duties without such compensation flexibility, McDonough said, "I wholeheartedly support the aggressive recruiting effort we have embarked upon."
Thus far, nearly 1,400 firms have registered with the board. Earlier this year, the board released its 2003 inspection report on the Big Four firms, and for its 2004 examinations added several second-tier firms, such as Grant Thornton, BDO Seidman and McGladrey.
Human capital expenses - including training and recruitment costs, as well as salaries and benefits - will account for nearly $99 million of the 2005 budget, with the rest going for information technology-related expenses, consulting fees and the cost of opening new regional offices in Chicago, Denver, and Costa Mesa, Calif., during 2005.
The PCAOB's entire 2005 budget - which must still be approved by the Securities and Exchange Commission - will be funded by accounting support fees and other assessments paid by the U.S. and foreign audit firms that the board regulates.
At its recent budget meeting, the PCAOB also proposed new rules outlining the procedures under which accountants facing disciplinary actions before the board may seek authority to subpoena documents or witnesses for their defense.
Under the proposal, parties subject to disciplinary proceedings before the board would have no "entitlement" to subpoena rights, but would be allowed to request a subpoena from the hearing officer assigned to their case.
The hearing officer would have discretion to approve the request if he determines that there is a reasonable basis for the subpoena, and that the evidence subpoenaed would be relevant to the board's decision in the case.
The SEC, however, would also have to approve the subpoena before it could be issued.
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