The PCAOB proposes to have large U.S. broker-dealers pay for inspections of their public auditors, as mandated by Dodd-Frank Act; costs are likely to exceed $1 million a year.  The PCAOB, or Public Company Accounting Oversight Board, which came into being as a result of Sarbanes-Oxley, voted Tuesday to propose a plan that would create and fund a temporary interim program for the inspection of auditors that examine broker-dealers. 

Sarb-Ox requires all broker-dealers to register with the PCAOB, but it doesn't give the PCAOB authority to oversee or take enforcement actions against companies that weren't publicly traded - companies that became subject to registration in 2008. 

Lawmakers made the change - included expanded oversight of broker-dealers - in the wake of the financial crisis after it was revealed that Bernie Madoff had his firm’s auditing done by a firm run from a 13-by-18-foot storefront in New City, NY.  Dodd-Frank eliminated a system in which auditors had to register with the PCAOB but weren’t overseen by the board.

Acting PCAOB Chair Daniel Goelzer, said The temporary interim inspection plan is "the first step down the road of turning that new authority into a functioning oversight program."   The scope of this new inspection program can be significant, in that more than 500 accounting firms registered with PCAOB these past 2 years because they audit broker-dealers.  Mr. Goelzer said an exemption from PCAOB oversight may be made available to those registered accounting firms that don't, in theory, have access to client funds.  

Keep in mind, that decision about the permanent inspection program are probably at least a year away.   [WSJ.online, 12/14] 

For further details, click onto:   [Bloomberg, 12/14, "PCAOB Proposes..."]