The new Public Company Accounting Oversight Board plans to launch inspections of the Big Four accounting firms in its first year as the industry's independent watchdog, the board's acting chief said Thursday.
Charles D. Niemeier, former chief accountant of the Securities and Exchange Commission's enforcement division, said tackling the Big Four would be a "Herculean task" for the fledgling board. But the interim chairman said it would help set a tone of "very aggressive" oversight of the approximately 700 firms that audit publicly traded U.S. companies.
The board, in its first formal public meeting Thursday at SEC headquarters, , unveiled an estimated budget of $36.6 million for 2003 and said its annual budget after it reaches full staffing probably will be about $50 million.
The board's salaries will be $560,000 for the chairman and $452,000 for the four other members -- amounts that deliberately were made equal to the salaries of members of the Financial Accounting Standards Board, the independent body that establishes specific bookkeeping rules for accountants.
Created last summer by the Sarbanes-Oxley reform act, the five-member PCAOB is intended to "audit the auditors," in the words of board member Willis D. Gradison Jr., a former Republican congressman from Ohio.
Niemeier said the board intends very quickly to take over the auditor-inspection role of the American Institute of Certified Public Accountants, the industry trade group that has been criticized for lax oversight. The first step, Niemeier said, would be to inspect the Big Four.
The group was known as the Big Five until last year, when Chicago-based Arthur Andersen collapsed amid allegations of criminal wrongdoing in its role as auditor of scandal-ridden Enron Corp. and other firms.
The PCAOB is an unintended beneficiary of Andersen's distress. The board just moved into its new headquarters, two stories of a Washington office building that Andersen vacated six months ago after negotiating an early buyout of its lease. The 46,000-square-foot space will provide room enough for about 150 workers.
The PCAOB also plans to open offices in New York -- where the Big Four all are headquartered -- and in other cities, Niemeier said. By the end of this year, the board expects to have about 200 employees and eventually as many as 300.
Besides Gradison and Niemeier, the other members of the PCAOB are Kayla J. Gillan, former general counsel of the California Public Employees Retirement System (CalPERS), and Daniel L. Goelzer, former SEC general counsel and former partner at the accounting firm Touche Ross.
Niemeier was appointed by the SEC, which oversees the board, to serve as interim chairman until a chairman is named to replace former federal judge and FBI Director William H. Webster.
Webster resigned in November after criticism over his role as a director of U.S. Technologies Inc., a Washington-based technology firm that fired its outside auditors a month after they pointed out weaknesses in its financial controls.
Controversy over the SEC's handling of the Webster appointment also led to the resignation of SEC Chairman Harvey L. Pitt and his chief accountant, Robert Herdman. Pending Senate approval of his successor, William H. Donaldson, Pitt continues to serve as SEC chief and appeared briefly at Thursday's meeting to introduce the board members.
The board also named Paul L. Schneider, head of a Virginia-based turnaround firm, as interim chief administrative officer, a 90-day position to help get the board up and running as it rushes toward an April deadline to begin registering the auditing firms under its jurisdiction.