Looking forward to 2010, the Public Company Accounting Oversight Board is bracing for a surge in litigation from the targets of its enforcement staff, a series of new regulatory responsibilities triggered by the Madoff Ponzi scheme, and corner-cutting by accounting firms squeezed by the ongoing economic crisis.

Those factors and others were cited by top PCAOB officials in moving to request a steep, 16 percent budget increase for the coming year.

If approved by the Securities and Exchange Commission, the proposed funding plan for 2010 will provide the PCAOB with a record $183.3 million budget — up $25.7 million from the current year. The increased funding would come on top of a 9 percent budget hike for the board in 2009, and it left PCAOB officials scrambling to justify the extra spending.

“It is certainly legitimate to ask why this is justified, given the current economic climate,” the board’s acting chairman, Daniel L. Goelzer, said in unveiling the new budget plan.

One of the factors cited by Goelzer in requesting the increase is an expected surge in enforcement litigation by corporations and accounting firms angling to overturn, or at least delay, disciplinary actions by the PCAOB.

Under the Sarbanes-Oxley Act, such disciplinary proceedings must remain non-public until the case is resolved, and PCAOB officials suspect that some targets of their enforcement activity may attempt to “game” the system during the coming year.

According to Goelzer, the targets of the board’s enforcement activities “sometimes perceive that litigation — and delay in public disclosure — is in their interest for reasons not always related to the merits of the case.”

The continuing economic struggles of many public companies will also make auditing more difficult and PCAOB inspections of accounting firms more “challenging,” the chairman noted.

Just last year the organization added dozens of new inspectors in response to what one board member called “an increase in pressure on auditors from companies to stretch accounting and auditing principles that can amount to financial reporting fraud.”

The 60 new staffers scheduled to be added in 2010 will further increase the PCAOB’s inspection resources to combat this problem. Specifically, the board’s inspectors are expected to focus more intensively on “aspects of financial reporting that require significant estimates and judgments” such as “financial instrument valuation, impairment [and] going concern evaluation.”

The PCAOB’s juiced-up 2010 budget will also be needed to cover the stiffer costs associated with the board’s increasingly robust program of international audit firm inspections. During the coming year the PCAOB expects to conduct some 90 cross-border inspections in 27 different countries — a complex and expensive process, according to board officials.

The extra funding will also be used to pay for a broadening of the scope of the PCAOB’s responsibilities. In the wake of the Madoff Ponzi scheme, the auditors of the 5,500 or so non-public securities broker-dealers are now required to register with the board, and PCAOB officials suspect that may be only the start of their involvement in this arena.

Legislation pending in Congress would extend the board’s inspections, enforcement, and standard-setting responsibilities to encompass broker-dealer audits — a significant undertaking for the organization. PCAOB officials are also concerned that some of the recommendations of the Treasury’s Advisory Committee on the Auditing Profession may require the board to expand the nature and scope of its current oversight of the major accounting firms.

While the PCAOB’s inspection and enforcement branches will continue to soak up the bulk of the organization’s budget, the board’s Office of the Chief Auditor is expected to require heftier funding next year as well.

According to Goelzer, the office “is focusing on some of the ‘nuts and bolts’ auditing issues that the inspections and enforcement programs have highlighted as areas where the standards can be improved or modernized.”

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