In the wake of Enron Corp.'s bankruptcy, Securities and Exchange Commission chairman Harvey Pitt is under mounting pressure to restore confidence in the U.S. accounting industry. His initial response, announced in January, is to replace the Public Oversight Board (POB), created in 1977 by the SEC to monitor accounting ethics, with a new Public Accountability Board (PAB), which will be more independent of the profession. Although the five-member POB is made up of nonaccounting professionals, Pitt contends that its objectivity is compromised, because the American Institute of Certified Public Accountants funds the $5.2 million operation.
"Regulation by the private sector but not by the [accounting] profession" is how Pitt describes the new board's mission. That, however, also describes the POB's. The difference between them, presumably, would be in the PAB's funding, but Pitt hasn't specified how the money will be raised. Suggestions range from a National Association of Security Dealerslike structure, funded through member dues and penalty fines, to a fee-based system similar to bank examinations.