October 4, 2011

PCAOB: Who Will Replace Dan Goelzer as a Board Member?

This Bloomberg article analyzes the current Board composition of the PCAOB – and notes how long-time Board Member Dan Goelzer’s replacement may well tip the balance regarding new PCAOB Board Chair’s Jim Doty’s ambitious reform efforts (also see Francine McKenna’s article on the topic). Here’s input that I received from a member:

As this article indicates, the SEC Chairman is now faced with a clear decision – does she appoint a person who is dedicated to investor protection or does she select the candidate the accounting profession is supporting? The profession has put forward a candidate, a partner from one of the firms, a firm that recently hired the top advisor to Schapiro and who Schapiro has hired other senior staff from. Investors, including the CII, have also weighed in with their candidate as well.

And while it is a vote of all Commissioners, given the current composition of the SEC with just four – this is clearly the decision of the SEC Chairman. During the past year, Chairman Schapiro and the SEC have picked three members of the PCAOB. One was a partner from one of the firms who has expressed pro audit firm views, a law partner who defended the Big 4 firms and has expressed similar views, and Chairman Doty whose views to date have been pro-investor protection.

By the way, the PCAOB published Staff Audit Practice Alert #8 yesterday to increase auditors’ awareness of risks when performing audits of companies with operations in emerging markets.

STA’s Beneficial Ownership Processing Study

Yesterday, the Securities Transfer Association (STA) released this study that evaluates the costs of beneficial owner proxy processing services, as compared to providing those same services to registered shareholders. After evaluating 20 Broadridge invoices, the study concludes that transfer agents can probably do it cheaper if the model was one of competitive pricing rather than a regulatory fixed rate. Having visited Broadridge’s processing facilities myself a few years ago, I imagine it would be hard for anyone to realistically compete with Broadridge’s actual processing of accounts – but it seems that there could be pricing issues that the NYSE needs to address.

Webcast: “Materiality: The Hardest Determination”

Tune in tomorrow for the webcast – “Materiality: The Hardest Determination” – to hear Linda Griggs of Morgan Lewis, John Huber of FTI Consulting, Eric Olson of Morrison & Foerster, and Dave Lynn of and Morrison & Foerster provide practical guidance about how to make “materiality” determinations for disclosure purposes, as well as how to make those determinations after-the-fact (i.e., the litigator’s perspective).

– Broc Romanek