Regulation: PCAOB enforcement chief warns auditors.

• Author: Marshall, Jeffrey
• Position: BusinessBRIEFS - Public Company Accounting Oversight Board

Company executives, rest easy: Claudius Modesti isn't coming after you, nor third-party advisors or investment banks. But he is coming after auditors who shirk their duties or engage in anything illicit.

Modesti, a former federal prosecutor, is director of enforcement and investigations for the Public Company Accounting Oversight Board (PCAOB). He talked about the unit's mission and activities at a recent Sarbanes-Oxley program in New York sponsored by the New York State Society of CPAs.

Simply put, Modesti's unit is focused on enforcing securities laws as they relate to auditor's roles. When auditors fail to sense that an issuer made significant departures from generally accepted accounting principles (GAAP), for instance, that pops up as a case to investigate. And most situations are likely to fall under investigation and inspection, he said; enforcement is reserved for the worst violations, though there can be some overlap between the two with certain inquiries.

He said his division tries to coordinate with its parent, the Securities and Exchange Commission (SEC), which has far broader powers, adding, "We don't want redundancy." He also insisted that "we're not trying to drive judgment out of the [audit] process."

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