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February 5, 2012

SEC commissioner opposes PCAOB’s Franzel appointment

A commissioner of the US Securities and Exchange Commission (SEC) has objected to the appointment of a new member of the Public Company Accounting Oversight Board (PCAOB) member.

In an unusual public spat, Luis Aguilar has spoken out against the appointment of Government Accountability Office managing director Jeanette Franzel, who will replace founding member Daniel Goelzer.

“My objection to this appointment is based on the fact that the commission must appoint individuals who have ‘demonstrated commitment to the interests of investors’,” Aguilar said. “This is not the case here.”

The SEC oversees the PCAOB and appoints its members. Aguilar said Franzel’s appointment to the five-member board is at a critical juncture for the PCAOB, which will vote on important audit proposals aimed to enhance the transparency and independence of audits. It is predicted Franzel could have a casting vote on the proposals.

“The success of these projects will require a board fully committed to investors as the owners of public companies, the providers of capital and the primary beneficiaries of financial statements,” Aguilar said.

Aguilar said he reached his conclusion after reviewing other candidates’ records and by speaking to investors, academics and members of US Congress who supported the appointment of an investor advocate.

The composition of the PCAOB board has caused conflict in the past as investor advocates have long pushed for the two CPA positions to be filled by accountants with a track record of promoting investor interests.

When announcing Franzel’s appointment on Friday, SEC chairman Mary Schapiro said: “Jeanette’s commitment to the public trust and America’s investors is demonstrated by her life-long public service and her constant dedication to increasing accountability, audit quality and audit standards”.

The Sarbanes-Oxley Act of 2002 created the PCAOB to provide independent oversight of audits of public companies and broker-dealers. The board is responsible for setting auditing standards and for registering, inspecting and disciplining public accounting firms.

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