The main U.S. accountant regulator vowed to press forward with acontroversial plan to name the auditors of public companies thathas been the focus of a five-year battle with industry.

The Public Company Accounting Oversight Board (PCAOB) plans inthe coming months to reissue the proposal, which has been opposedby accounting firms that say it will make auditors a bigger targetof lawsuits. PCAOB Chairman James Doty told members of theSecurities and Exchange Commission (SEC), who approved his agency's$250 million budget Wednesday, that the new measure should be moreacceptable to the SEC and the audit industry.

“We have reached an approach that we think is workable andavoids some of the problems that we discovered,” he said.

The tussle over rules speaks to the gulf between the PCAOB,which funds itself with fees paid by public companies, and the SEC,which must approve the board's spending and rules.

The PCAOB says affixing a name to audits, which have longcarried only the firm's identity, would improve accountability andlet investors discern good auditors from bad ones. The SEC hasquestioned whether disclosure would create barriers for companiesraising capital.

The SEC's pushback is the latest challenge to the accountingboard, which has struggled to complete regulations in the face ofindustry lobbying. The board last year dropped an effort to requirecompanies to switch auditors every decade—a plan that was unpopularwith companies and accountants alike—after House lawmakers voted toblock its authority.

The SEC now plans to hire an additional accountant to take “afresh look” at the board's activities, “with a focus on improvingits timeliness,” the SEC disclosed as part of its budget proposalon Feb. 2.

“The SEC is telling them, 'Get back to your core function,'”said Dan Goelzer, a former acting chairman of the accounting boardwho now is a partner at Baker & McKenzie LLP. “They got alittle bit diverted off into these other policy-level ordisclosure-focused projects that don't relate directly to the wayaudits are performed.”

Doty announced today that he plans to hire an outside consultantto help the agency speed up the pace at which it issues rules. Hetold reporters after the meeting that he couldn't say how much theconsultant would cost.

SEC Chief Accountant James Schnurr said in December that theaccounting board should work on rules that govern how audits areperformed, rather than policies focused on disclosure or conflictsof interest.

“Some of the most important projects to update auditing andquality-control standards that are on the PCAOB's agenda simplyhave been moving too slowly,” Schnurr, a former auditor at DeloitteLLP, said at an accounting-industry conference.

Right Forum

SEC Commissioner Daniel Gallagher, who also has called for theaccounting board to refocus on performance standards, saidWednesday that the PCAOB's “limited standard-setting resources havebeen focused too heavily on disclosure projects.

“To the extent that this focus on disclosure comes at theexpense of making meaningful progress on core audit performancestandards, which would drive improved auditor performance, thosepriorities need to be reexamined,” Gallagher said.

The battle over naming auditors began in 2009, when the boardsought to have accountants affix their signatures to their annualaudits of public-company books.

The accounting industry decried the effort, citing a worry itwould make them bigger targets for lawsuits. The board thenproposed to print the name of the lead partner without asking for asignature.

The SEC sided with the accounting industry, saying that eventhat level of disclosure could complicate companies' efforts toraise money, Goelzer said. Once auditors are named publicly, theycould have to sign off each time a company sold equity or debt tothe public.

“That is the source of the tension between the two agenciesabout partner identification,” Goelzer said.

Facing opposition from the SEC and the accounting industry, Dotyrecently offered a new option—allowing firms to disclose the namein a separate public notice filed with the board.

“That seems like an elegant solution to the whole thing, whichallows you to avoid the debate over additional liability,” saidHarvey Goldschmid, a Columbia University law professor and formerSEC commissioner who sits on advisory boards for the audit industryand the accounting board.

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