Finally, although it is supposed to regulate the business of auditing public companies, no more than two of its five members–who must serve full-time–can have had backgrounds as accountants or auditors. It is supposed to be a self-regulatory organization for the auditing activities of the accounting industry, but it is not supported by the industry it regulates instead, it was authorized by Congress to fund itself by levying fees on all public companies–essentially a tax on the economy as a whole. Although it was established by congressional legislation, it is a District of Columbia not-for-profit corporation, not a government agency. This entity has some truly unique and troubling features. In all of the commentary about the Sarbanes-Oxley Act, not much attention has focused on the act’s creation of the Public Company Accounting Oversight Board (PCAOB). Before these costs get completely out of hand, Congress should intervene and bring it under control. But that is only one of the costs that this agency will impose on the economy. Its freedom from the ordinary mechanisms of accountability for quasi-governmental functions is already having an effect, shown in its rapidly growing budget. Although industry self-regulatory organizations are not unusual, this one has the extraordinary power to tax all public companies to support its operations. The Public Company Accounting Oversight Board is a not-for-profit corporation established by the Sarbanes-Oxley Act to regulate the business of auditing public companies. This essay is available here in Adobe Acrobat PDF format.
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