Oversight Board Launch Threatened

Nine days before the first scheduled meeting of the Public Accounting Oversight Board, the panel has no budget, no office, no staff -- and maybe no leader.

“Dates for two meetings have been set. I’m not aware of anything else that’s been done,” said Willis Gradison, a former Republican congressman from Ohio and a member of the new board.

The panel, set up by congressional directive in the aftermath of this year’s wave of corporate accounting scandals, was supposed to put teeth in federal oversight of the accounting industry.

But its designated chairman, former federal judge William H. Webster, is under fire for his work as a director of a small company that has been sued for fraud.

And the Securities and Exchange Commission, which oversees the new board’s work, is in turmoil over allegations that Chairman Harvey L. Pitt did not share information about Webster’s past with other SEC commissioners ahead of their confirmation of Webster on Oct. 25.

Pitt resigned from the SEC late Tuesday.

The controversies threaten to delay the launch of the accounting board. By law, it must be in place by early spring.

“What you wanted to see was progress in establishing a foundation -- a chairman and board members that inspired confidence and a budget that enabled them to do something, and a staff,” said Michael Granof, an accounting professor at the University of Texas.

“You don’t see any of that.”

Gradison said Webster had coordinated everyone’s schedules to set the first two meeting days, on Nov. 13 and Dec. 2.

But Webster said Monday that he is prepared to resign if he decides that the storm over his work on the board audit committee of U.S. Technologies Inc. in 2001 has become an “impediment” to the board’s effectiveness.

Pitt’s resignation Tuesday could spur Webster to do the same, some analysts said.

“If Harvey doesn’t make it, Webster isn’t going to make it either,” said Eric Sussman, an adjunct faculty member at the Anderson business school at UCLA.

That may hobble the new accounting board -- which was created to ensure that auditors are ethical, independent and produce high-quality work -- before it gets started, some experts said.

The board is supposed to register all accountants who audit public companies, create auditing standards and decide how audits should be reviewed, a task that until now has been left primarily to the accounting industry itself.

A federal corporate reform law passed in July requires the board to be up and running before April 26.

SEC spokesman Brian Gross said the board probably will set a budget, which the SEC must approve, by its second meeting.

The SEC will advance the accounting board money from its 2003 budget to operate until the board starts collecting fees from public companies, as mandated under the law.

“I think the board is still on schedule,” Gross said.

It was anticipated that the board members would spend a couple of weeks removing themselves from their previous jobs, he said.