in

SEC Removes Duhnke As PCAOB Chair – Accounting and Audit


SideBar

The PCAOB has been plagued by troubles in the last few years,
including the 2017 leaking scandal, which, in 2018, led the SEC to
file charges against six CPAs, including former staffers at the
PCAOB and former partners of KPMG, arising out of “their
participation in a scheme to misappropriate and use confidential
information relating to the PCAOB’s planned inspections of
KPMG.” Essentially, the former PCAOB staffers were alleged to
have leaked to KPMG the plans for PCAOB inspections of
KPMG-“literally stealing the exam.” (See
this PubCo post
.) The same scheme led the U.S. Attorney’s
Office for the SDNY to file criminal charges against the former
staffers, and some have actually been sentenced to prison.

Following that scandal, as reported by the WSJ in October 2019, the PCAOB
“slowed its work amid board infighting, multiple senior staff
departures, and allegations that the chairman has created a
‘sense of fear,’ according to a whistleblower letter and
people familiar with the situation..The regulator has issued 27%
fewer audit-inspection reports this year, board data show, as
senior staff positions remain unfilled for months.” What’s
more, that same whistleblower complaint- submitted by a group of
employees to the board in May and to the SEC in August-precipitated
the appointment of Harvey Pitt, former SEC Chair, to review
“PCAOB corporate governance.”

A PCAOB spokesperson told the WSJ  that,
following the eruption of the leaking scandal in 2017, the board
“undertook a sweeping assessment in 2018 of its operations and
has been working toward ‘a series of transformation initiatives
to address systemic issues that exist across the
organization.'” And, after the SEC became aware of the
leak of confidential information, in December 2017, it replaced the
PCAOB’s entire board. But, the WSJ reported,
shortly after arriving, the new Chair “began pushing out
longtime senior executives, according to the whistleblower letter
and people familiar with the matter. The whistleblower letter said
the regulator ‘is permeated by a sense of fear,’ due to
‘the numerous terminations . [some] driven by
retaliation.'” The new Chair also “clashed with other
board members over hiring choices, the people familiar with the
matter said.”

Then, although PCAOB members have historically been reappointed
for new terms, one board member, Kathleen Hamm, wasn’t
reappointed to the board, 
support
 from the Council of Institutional Investors
notwithstanding. She was replaced on the PCAOB by a White House
staffer.  In addition, Clayton announced that Commissioner Hester Peirce
would be leading the SEC’s “coordination efforts with the
Board of the PCAOB, in coordination with the SEC’s Chief
Accountant Sagar Teotia and the Office of the Chief
Accountant.” While, at first glance, it all sounds fairly
anodyne, reports surfaced that Hamm had had disagreements with the
PCAOB Chair on policy matters.

In additionBloomberg Financial Accounting
News
 reported, in 2019, two Democrats on the Senate
Banking Committee sent a letter to Clayton suggesting, in light of
the problems cited by the whistleblower in
the WSJ article, that SEC oversight of the PCAOB
showed “questionable judgment and an alarming lack of
transparency.”  The Senators also questioned the
appointment of Peirce and sought information on the role she would
be playing. They characterized her appointment as
“troubling” because it “raises the potential of
undue influence,” given that the entire SEC is supposed to
oversee the PCAOB, not a single coordinating commissioner, and that
Peirce was a “longtime colleague” of the PCAOB Chair.

And, if that weren’t enough, former SEC Chair Arthur Levitt
penned an op-ed in the NYT in 2019, charging
that “what is happening at the Public Company Accounting
Oversight Board-the body tasked with auditing the auditors-should
alarm the investing public and anyone who cares about objective and
experienced oversight of the audit profession.” His concern
was an outgrowth of the change in members of the board (which he
appears to view as politically motivated), as well as the
appointment of Peirce, whom he termed “a regulation skeptic,
[to be] in charge of coordination efforts with the board-a signal
that the S.E.C. is seeking to pull it into its efforts to weaken
requirements for audits of internal controls at public
companies.” (See
this PubCo post
.) The PCAOB has a critical role to play; yet,
citing the WSJ article, he contended that it ” is
doing less oversight and inspection work than it once did, and key
positions at the agency are unfilled. Morale is reportedly
low.” In his view, what is “at risk isn’t a specific
regulatory function of the P.C.A.O.B.; it’s the independence
and the credibility of the board and its staff as a whole.”
(See
this PubCo post
.)

Finally, as reported by Thomson-Reuters, a lawsuit was filed last
month by a senior officer of the PCAOB against the regulator and
Duhnke, charging unlawful termination on the basis of race. The
litigation accused Duhnke of perpetrating “a xenophobic and
racist campaign” against her, including allegations that he
made racist comments in her presence, remarked about “her
Chinese ancestry and birth overseas,” regularly referred
“to the COVID-19 pandemic as ‘kung flu’ and the
‘Chinese flu’ in her presence,” and mocked her for
wearing a mask in the office. The PCAOB has denied the allegations,
according to Law.com, contending that the PCAOB officer was
fired over “internal complaints about her conduct and for
questions about the necessity of certain travel. “

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



Source link

Friends, this isn’t the time to be complacent. If you are ready to fight for the soul of this nation, you can start by donating to elect Joe Biden and Kamala Harris by clicking the button below.

                                   

Thank you so much for supporting Joe Biden’s Presidential campaign.

What do you think?

Written by Politixia

Leave a Reply

Your email address will not be published. Required fields are marked *

How Nottingham Forest continue to tackle racism one year on from powerful message

Mike Pence Saved The Republic On Jan. 6 – And No One Is Talking About It, Not Even Him