PCAOB hits pause on setting up new outside advisory groups

The Public Company Accounting Oversight Board is reassessing its plans to reestablish its outside advisory groups after the latest bout of turmoil at the audit firm regulator.

Earlier this month, the Securities and Exchange Commission abruptly removed PCAOB chairman William Duhnke following complaints about the deregulatory environment at the PCAOB, a drop in enforcement actions, lack of meetings with its outside advisory groups, terminations of longtime employees, and accusations of discriminatory behavior (see story). The SEC has reportedly opened an investigation into Duhnke (see story). Board member Duane DesParte was named acting chair of the PCAOB, but the SEC’s new chairman, Gary Gensler, plans to replace the entire board.

In response to complaints that the board had stopped holding meetings of its outside Standing Advisory Group and Investor Advisory Group after 2018, the PCAOB announced in March that it would set up a new Standards Advisory group to give stakeholders an opportunity to engage with the board (see story). The group would have had four seats reserved for representatives of the investor community, four seats for audit professionals, three seats each for audit committee members or directors, financial reporting oversight personnel, and academics or others with specialized knowledge, with each of the representatives appointed for two years. But given the recent upheaval at the board, the PCAOB announced Tuesday that it is now pausing those plans.

DesParte has asked the PCAOB staff to reassess its stakeholder engagement efforts, including revisiting the structure and membership of the advisory groups.

“It is crucial we seek a comprehensive and diverse array of perspectives and advice to best inform our oversight work and advance our mission of investor protection,” DesParte said in a statement Tuesday. “Listening carefully to the feedback we have received and reflecting on our work in many areas, including our engagement with the investor community, I believe it is important to reassess our current path to ensure all stakeholders are represented at the table and that their voices are heard.”

As a result, the PCAOB has paused the nominations process for membership in the Standards Advisory Group. The board said the nominations that have been submitted so far will be considered once the reevaluation of the framework and composition of advisory groups is completed, and more nominations may be solicited at that time.

“We appreciate all those who have stepped up as nominees to share their insights with the Board,” DesParte added. “We encourage them and other stakeholders to continue to engage with us as we work to enhance our ongoing outreach efforts.”