Freed from the threat of the Supreme Court putting it out of business, the Public Company Accounting Oversight Board has decided to start flexing its muscles.

The board issued a quick succession of announcements in a single day last week, including new and stricter risk assessment standards, plans to impose more sanctions on accounting firms and managers that don’t adequately supervise their staff, and the intention to ask Congress to allow the board to make its disciplinary proceedings and hearings public (see PCAOB Toughens Risk Assessment Audit Standards, PCAOB to Crack Down on Firms’ Supervision Failures, and PCAOB Wants to Make Disciplinary Hearings Public).

Couple that with the rising tide of whistleblower complaints coming the way of the PCAOB from disgruntled accounting firm staff and clients through its online Tip Center, and you have a newly energized board that’s ready to do a more rigorous job of policing the profession (see PCAOB Fields Rising Number of Whistleblower Tips).

Perhaps the most startling announcement was the board’s plan to ask Congress to expand Sarbanes-Oxley to start making disciplinary hearings and proceedings public. The board already won the right in the recently passed financial reform bill to beef up its inspections and discipline of auditors of broker-dealers, like the tiny firm that audited Bernard Madoff’s investment management business. The PCAOB also can now share information with foreign auditor oversight authorities under certain circumstances, thanks to the financial reform bill. Now they just have to get the foreign auditor oversight authorities to share more information with the PCAOB.

But the PCAOB now plans to ask Congress for a change in Sarbanes-Oxley that will allow it to make its disciplinary proceedings public and thereby shine a light on auditing firms and clients who prefer to drag out the proceedings in private.

The PCAOB noted that under current law, firms and auditors that are litigating with the PCAOB have little incentive to consent to public proceedings and can prevent the proceedings from becoming public for long after the information would be most relevant to investors, other auditors and interested parties.

“No other auditor, investor, audit committee, or member of the media is entitled to know what the PCAOB considers to merit discipline, whom it has charged, what issues are being litigated, or whether the PCAOB staff has prevailed or not,” said acting PCAOB chairman Daniel Goelzer. “The public is in the dark about how the Board uses its enforcement authority until there is a settlement or an SEC decision on the Board’s sanctions.”

The PCAOB staff is still drawing up the proposal, and it isn’t clear how public the proceedings will be. It’s doubtful we’ll be seeing a PCAOB TV or PCAOB-SPAN channel on the cable TV box anytime soon. More likely, the PCAOB would make more of the documents public earlier, or perhaps we would be able to listen in to a webcast of some of the proceedings or hearings. Don’t expect it to be the next spin-off of “Law and Order,” though.

The PCAOB’s plans to crack down on firms’ supervision failures also indicate a new get-tough approach on the part of the board. In this case, Sarbanes-Oxley already contains a provision that allows the board to levy sanctions on firms and supervisory personnel who fail to reasonably oversee associates who violate specific laws, rules and standards. The PCAOB highlighted the provision in its announcement, and went on to discuss possible future rulemaking and standard-setting that would require firms to make and document clear assignments of the supervision responsibilities already required under the law.

The PCAOB evidently wants firms to make sure that the staff members they assign to audits are watched more closely. One firm got into trouble not long ago for assigning students to do audits of public companies. That will mean much sharper scrutiny by partners of their staff members’ work, and no doubt extra hours documenting all the extra precautions and controls they put in place.

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