PCAOB revives outside advisory groups for investors and others

The Public Company Accounting Oversight Board is once again forming an Investor Advisory Group and starting a new Standards and Emerging Issues Advisory Group after the old board came under sharp criticism for scrapping its outside advisory groups.

The PCAOB had stopped holding meetings of its old Investor Advisory Group and Standing Advisory Group in 2018 under former chair William Duhnke and announced plans to restructure the outside advisory groups. However, those plans didn’t come into fruition, and last year, Securities and Exchange Commission chairman Gary Gensler ousted Duhnke and vowed to replace the rest of the board after complaints about that issue and others at the board, including discrimination, political bias and lack of enforcement (see story). The SEC appointed a new PCAOB chair, Erica Williams, who is a former SEC official, along with three other board members, while retaining one long-serving board member, Duane DesParte, who was acting chair during the transition. Williams was sworn in earlier this month (see story).

Now the PCAOB is moving ahead with the previously announced plans to reintroduce the outside advisory groups and soliciting input and nominations for them.

The Investor Advisory Group will advise the PCAOB on issues concerning the PCAOB’s mission to oversee the audits of public companies, and related matters (including audits of broker-dealers), to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports, including providing investors’ perspectives on key areas of concern and potential emerging risks related to PCAOB oversight activities.

Courtesy of the PCAOB

The Standards and Emerging Issues Advisory Group will replace a Standards Advisory Group that was announced in early 2021 but never actually formed after the shake-up on the board (see story). It will advise the PCAOB on existing standards, proposed standards, potential new standards and, if requested by the board, on matters other than standards that are of significance to the PCAOB, including emerging audit issues. The Standards and Emerging Issues Advisory Group is expected to publicly engage with a diverse group of investors and other stakeholders.

To promote transparency and engagement around the structure and operation of these new advisory groups, the PCAOB said it has decided to defer adoption of formal charters for both groups until after the public has a chance to weigh in on their attributes. The PCAOB voted to publish a request for public comment that describes the potential structures for the IAG and SEIAG and asks for public input. The comment period is open through Feb. 28.

“The effectiveness of our oversight depends on robust dialogue with key stakeholders, including the investor community, audit committee members, preparers and auditors of financial statements, and academics, among others,” Williams said in a statement Monday. “Building on the success of the PCAOB’s past advisory groups, the IAG and SEIAG will provide us with opportunities to obtain key views and insights from regular engagement with stakeholders.”

In addition, the PCAOB has opened nominations for those who wish to participate in either the IAG or the SEIAG. There is a self-nomination form to nominate yourself to serve on either advisory group and a nominator form to nominate someone else to serve on either group.

The deadline for nominations is Feb. 28. Nominations are open to both new prospective participants and members who have served on the PCAOB’s previous advisory groups.

The PCAOB said it will select advisory group members, according to discretion, based on nominations (including self-nominations) received from any person or organization. The board has also told PCAOB staff to contact individuals who applied to participate on the Standards Advisory Group to see whether they wish to be considered to serve on the IAG or SEIAG, or both.

The PCAOB expects to announce the advisory group appointments in the early spring, and anticipates that members’ terms will begin immediately. Advisory group membership is only for that advisory group member, and the duties and responsibilities can’t be delegated to others. Advisory group members receive no compensation for their service but may have their related travel expenses reimbursed by the PCAOB, subject to the PCAOB’s travel and business expense reimbursement policy.

Williams signaled that the revival of the outside advisory groups showed the change underway at the PCAOB. “It is fitting that one of the first major actions of the new PCAOB board since being fully seated only weeks ago is to take rapid and decisive action on establishing these new groups,” she said in a statement. “Obtaining input from these groups is obviously a priority for this board, and we intend to move forward quickly to stand them up fully, appoint new members, and hold public meetings as early as this spring.”