Accounting board's chief auditor speaks out: In an interview, Douglas R. Carmichael, chief auditor for the Public Company Accounting Oversight Board, talks about the board and the tasks ahead.

• Author: Fraser, Bruce W.
• Position: Accounting

Within the auditing arena, Douglas R. Carmichael has earned a reputation as the auditor's auditor -- a well-deserved accolade, say many who know him or have worked with him.

Today, with the accounting industry under siege, the 61-year-old academic faces his biggest challenge -- and arguably the culmination of his life's work -- as the first appointed chief auditor for the Public Company Accounting Oversight Board (PCAOB), the newly created regulator of the accounting industry. As such, he will oversee the redrawing of the nation's auditing standards and counsel the board on auditing and accounting practices.

In a sense, Carmichael has been preparing for this role his whole professional life. A professor of accounting at Baruch College at the City University of New York since 1983, Carmichael has studied and written prolifically about accounting for years, has testified in many cases against auditors and has extensive experience in standard setting. "I think the litigation and other consulting I've done has given me a good handle on what happens in practice and the kind of things that can go wrong in an audit," he says.

Carmichael holds an economics degree and a doctorate in accounting from the University of Illinois, which is noted for its strong accounting department. While at Baruch, he helped establish and was director of the Center for Financial Integrity. Unlike scholars at the University of Chicago, who regard regulation as unnecessary and an intrusion into the free markets, "1 thought it would be useful to have an academic center that recognized there was an important role for regulation," Carmichael says. "When Enron came along, it gave it an impetus it didn't have before."

Before joining Baruch, Carmichael was vice president of auditing at the American Institute of Certified Public Accountants (AICPA), the industry's main trade group, where he eventually headed the division that set audit standards. He has become an outspoken critic of many of the institute's prevailing standards, many of which he regards as weak and not in the public interest. Others have shared that view, and the five-member PCAOB will be taking over the standard-setting authority from the institute.

The oversight board, based in Washington, will have an advisory council of some 30 people, including auditors, investors and others with a direct interest in the process. It has adopted existing standards as an interim measure, but will begin reviewing these soon. Carmichael, who will be on leave from Baruch beginning in September, lives on a farm in eastern Pennsylvania with his wife and has several miniature cows as pets.

FE: What is your role as chief auditor of the PCAOB, and how do you plan to work with William McDonough, who will be the permanent chairman, and other...