PCAOB's Primary Mission: Improving Confidence in Financial Reporting, The

CPA Journal, The, Jan 2008 by Kranacher, Mary-Jo

CPAJ: The PCAOB is now going after some unregistered auditing firms. Some people have complained that this is not a good use of the PCAOB's resources. How would you respond?

Gradison: Actually the SEC, not the PCAOB, has taken action against firms that appear to have lent their names to the audits of issuers without being registered with the PCAOB. In a few instances, the PCAOB has identified such firms and what we've done pretty uniformly is to deny them registration-that is, the ability to audit public companies for one year-after which they can reapply for registration.

The PCAOB's Future

CPAJ: In September 2007, PCAOB board member Kayla Gillan announced that she will be stepping down. How will that affect the dynamics of the board?

Gradison: It will be a real loss to us in terms of what she's contributed, and the experience that she's brought. Kayla has brought particular insights into the concerns of investors because she was general counsel for one of the largest retirement systems in the world, the California Public Employee Retirement System (CalPERS), before she joined the PCAOB.

The board is small-only five members. Board members were initially appointed to varied and shorter time frames-one year, two years, and so on-in order to ensure staggered terms for members, and therefore continuity. Members may be reappointed for a second term. Once the staggered terms end, each new board member will have five-year terms with the option of an additional five years. My total service will be seven years; Kayla's will be less than that.

In 2008, another board member's term will expire. The year after that, mine does. Under the statute, these vacancies are filled by the SEC acting as a body. I say it that way because one of the issues that's been raised in a lawsuit that questions the constitutionality of SarbanesOxley and the PCAOB is whether the Constitution is violated by the fact that the SEC as a group, rather than just the SEC chairman, names the PCAOB board members. The case is now before the U.S. Court of Appeals.

I thought when the suit was first filed that it would be decided by the court in 2008, but now I think that's totally unrealistic-probably 2009 or later because of the complexity of the case and the time it takes to move through the appellate process.

CPAJ: Is there anything that we didn't touch on that you would like our readers to know?

Gradison: Yes: How delighted I am that we were able to get together. It's really important for the PCAOB to have an opportunity to share our views and answer questions. Communication is very important. A lot of people are impacted by what the PCAOB does. When I was in public office, reaching the public was what you had to do when you were running for office. PCAOB board members aren't running for office, we're simply trying to do a good job. The more people know about what we are doing, the more likely they are to let us know what they think about us. We want two-way communication. So, my bottom-line message to you and your readers is: "Hey, folks, keep the cards and letters coming."