For Auditors' Eyes Only

A federal law that enables auditors to keep clients in the dark about the audit firms' quality-control deficiencies for as much as a year leaves public companies open to the risk of financial restatement, audit-committee activists contend.

The statute, Section 104 of the Sarbanes-Oxley Act, says that if the Public Company Accounting Oversight Board (PCAOB) finds during its inspections of auditors issues that need improvement—particularly in the area of quality control—the audit firm has one year from the date of the report to fix them. If they do so within that time frame, the matter stays confidential.

See full Article.