Great article from James Hamilton that we thought our readers would enjoy. Here is a snippet:
Federal Court Limits Sarbanes-Oxley Protection to PCAOB-Auditor Documents Prepared Specifically for the Board
Sarbanes-Oxley provisions protecting PCAOB-auditor documents from disclosure are expressly limited to materials that an audit firm prepared specifically for the Board, ruled a federal judge, and do not protect from discovery documents related to or concerning the Board’s inspection process. Indeed, the plain language of Section 105(b)(5)(A) makes clear that Congress did not create a blanket privilege regarding the PCAOB inspection process. Thus, in a securities fraud action alleging that a company failed to disclose the effect of significant financial transactions in violation of GAAP and SEC rules, the outside auditor was ordered to produce all documents on the accounting and disclosure of the transactions that were not prepared specifically for the PCAOB. In addition, the audit firm must give the investors a privilege log describing the nature of any documents that it has withheld pursuant to Section 105(b)(5)(A). (Silverman v. Motorola, Inc. et al., ND Ill, June 29, 2010, No. 07 C 4507).
Section 105(b)(5(A) is a clear and unambiguous provision that protects from disclosure only materials that an accounting firm prepared specifically for the Board. Since there is no ambiguity in this statutory provision, noted the court, there was no need to look any further than the text of the statue in order to resolve the discovery issue. Inclusion of the phrase "specifically for the Board" makes clear that the statute is applicable to only a portion of any information or documents that may derive from, refer to, or relate to a PCAOB inspection. The court rejected KPMG’s assertion that the statutory protection includes any documents related to or concerning the PCAOB inspection process since to accept the firm’s premise would extend interpretation of the provision beyond its plain language and render meaningless the phrase "specifically for the Board."
Read more on the blog post here: http://jimhamiltonblog.blogspot.com/2010/11/federal-court-limits-sarbanes-oxley.html
