William J. McDonough, who in two years as chair of the Public Company Accounting Oversight Board helped guide the audit overseer from shaky beginnings to a powerful regulatory entity with eight offices and over 400 employees, will step down from his post effective Nov. 30."I have a wide range of interests in corporate governance, finance and international affairs, and will explore one or a variety of activities in those fields," McDonough, 71, said.
The five-member Securities and Exchange Commission will appoint a successor.
Calling the PCAOB a "vibrant institution," McDonough said, "The supervisory process that we have adopted is working well, implemented by the adoption of auditing standards that make sense and an inspection process that helps auditors realize they must improve their practices to win back the support of the public. The firms know that public confidence is won most quickly and effectively through their own efforts, helped and prodded when necessary by the PCAOB."
A former banker, McDonough was serving as president of the New York Federal Reserve when then-SEC Chairman William Donaldson named him to take over from acting chair Charles Niemeier.
Niemeier had assumed the job following the resignation of inaugural chairman and former FBI director William Webster, who stepped down after a month in the newly created position when it was disclosed that he headed the audit committee of a technology company under investigation for accounting irregularities.
McDonough, whose appointment to the PCAOB was unanimous, helped stabilize the fledgling body - created as a result of the passage of Sarbanes-Oxley - and, in public appearances, often spoke of the importance of the "tone at the top" at audit firms.
He took over the PCAOB amidst the accounting implosions at Enron and WorldCom, and the collapse of former Big Five firm Arthur Andersen after its conviction on obstruction of justice changes related to the failed Enron audit.
McDonough also spearheaded the registration process for audit firms with publicly traded clients, and the first-ever inspections of audits conducted by Big Four firms. He also encouraged auditors to apply common sense and judgment, as opposed to adopting a simple "check-the-box" approach.
Currently, more than 1,500 firms are registered with the PCAOB, including a number that do not have SEC audit practices.
"It has been an exceptional opportunity to work closely with Bill McDonough in recent months, as together we have worked to implement the auditing and inspection process that recently was mandated by Congress," said SEC Chair Christopher Cox. "I am especially grateful that he has agreed to remain at the PCAOB long enough to permit a thorough search for a worthy successor."
"As the first chairman of the PCAOB, he has done an exceptional job in creating a first-class regulator for the auditing industry," stated Sen. Mike Enzi, R-Wyo., who is currently the only accountant in the Senate. "He is a man who not only understands the intricacies of the industry, but has a passion for making them better."
McDonough spent over two decades with First Chicago Corp. and the First National Bank of Chicago before joining the New York Fed in January 1992 as executive vice president, heading the bank's markets group. He was named president 18 months later, and served as the vice chairman and a permanent voting member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy.
McDonough said that he has no intentions of retiring, and that he would continue to serve as chairman of the Investments Committee of the United Nations Joint Staff Pension Fund, the Review Group on the Organization of the Financial Sector and Capital Markets at the International Monetary Fund, and as a board member of the New York Philharmonic.
