Top audit watchdog granted more resources

Auditors may take extra caution when evaluating financial statements following an 8 percent budget increase for the US Public Company Accounting Oversight Board (PCAOB)’s 2013 fiscal year.

The US Securities & Exchange Commission (SEC) approved the budget earlier this month, allowing the audit watchdog to levy $234 million in fees on issuers and broker-dealers to support its operations. The overall 2013 budget stands at $245.6 million.

The increase was primarily made to boost the PCAOB’s audit inspector workforce and to finance international oversight duties, according to a SEC statement. 

The PCAOB was created in 2002 under the Sarbanes Oxley Act to oversee the auditing of US public companies. Overseen by the SEC, the board also has the power to inspect, investigate and punish accounting firms and accountants for violating its regulations, professional standards or federal laws.

While the PCAOB only sets standards related to the conduct of public audits, auditors often follow the same standard when auditing private company financial statements to avoid market confusion and double standards. Publicly-listed asset management firms, such as The Blackstone Group and The Carlyle Group, directly fall into the PCAOB’s domain. 

Recently the regulator has taken a greater interest in how auditors evaluate judgmentally-determined fair value estimates, noted Duff & Phelps valuation specialist David Larsen. With the possibility of tougher inspections, auditors may become more aggressive in examining GPs' fair value numbers. 

The PCAOB's budget, however, is not yet certain. According to a Reuters report, the PCAOB faces a potential $18 million cut to its budget under sequestration – a set of automatic spending cuts triggered on 1 March if Congress is unable to negotiate a government spending package. 

“I would expect that in the event that sequestration occurs and the PCAOB's 2013 budget is indeed affected, the PCAOB will work with the Commission and Commission staff as appropriate regarding implementation of sequestration,” said SEC chairman Elisse Walter.