US SEC OKs audit watchdog's 6 pct budget increase

By Rachelle Younglai

WASHINGTON, Dec 18 (Reuters) - The U.S. Securities and Exchange Commission approved the Public Company Accounting Oversight Board's 6 percent budget increase for 2008 on Tuesday, but not without one SEC commissioner complaining that the audit watchdog's salaries for board members were too high.

The SEC voted 3-1 in favor of allowing the PCAOB, which oversees corporate auditors, to spend $144.6 million in 2008, compared to $136.4 million this year.

The board, a nonprofit corporation established by Congress to regulate the accounting profession, expects to spend more than 70 percent of its budget on hiring and retaining experienced auditors.

PCAOB Chairman Mark Olson said it was hard to achieve the staffing required given the "tight market for the skill set."

But SEC commissioner Paul Atkins objected to the board members' salaries, which are up about 14 percent since the PCAOB's first budget in 2003.

The four board members are expected to earn $531,995 in 2008, a 3.3 percent increase over 2007. Olson is expected to earn $654,406 next year, also up 3.3 percent over this year.

"I am concerned that the board salaries are disproportionally high, and we must not forget that these salaries along with the rest of the board budget are paid by investors," said Atkins, who cast the dissenting vote.

PCAOB salaries are much higher than those of SEC commissioners, who earn $145,400 a year. SEC Chairman Christopher Cox earns $154,600.

Atkins acknowledged that salaries needed to be competitive to attract technical staff but said, "We have not had difficulty finding or retaining qualified and engaged board candidates."

About half of the PCAOB's total staff is dedicated to inspecting audit firms -- duties required by the 2002 Sarbanes-Oxley corporate reform law that followed accounting scandals which shattered investor confidence.

The largest accounting firms, such as PricewaterhouseCoopers LLP [PWC.UL], Deloitte & Touche LLP [DLTE.UL], Ernst & Young LLP [ERNY.UL] and KPMG [KPMG.UL], are inspected annually.

The smaller firms are inspected once every three years and the board expects to look at 220 in 2008, up from about 180 this year.

The PCAOB also expects to start inspections in Asia, South America and some European Union countries, which Olson said is costly in time and travel.

"These international inspections place additional demands on our scarce inspections resources," Olson said. "Each year we are doing more international inspections."

It is the board's sixth budget since the Sarbanes-Oxley Act passed. Most of the PCAOB's funding comes from public companies, not the auditing industry, to ensure its independence and prevent conflicts of interest.