Proposed Expansion Of Auditor Liability Would Be Ill-Advised

The Public Company Accounting Oversight Board's proposed revisions in September to its Rule 3502 significantly expand its authority to impose liability on accountants for contributing to a violation of PCAOB rules, securities laws, or professional standards. The board shouldn't make these changes. The deadline for comments on the proposal is Nov. 3.

Rule 3502 prohibits people associated with registered public accounting firms from taking or omitting an action while "knowing, or recklessly not knowing, that the act or omission would directly and substantially contribute to a violation." This means the PCAOB must establish scienter—at a minimum, an "extreme departure from the standard of ordinary care for auditors" in the face