PCAOB shakeup continues with departure of chief auditor
The Public Company Accounting Oversight Board said Tuesday that chief auditor and director of professional standards Martin Baumann plans to leave by the end of the month, the latest in a series of changes in personnel at the PCAOB in recent months.
Last Friday, the board announced that Helen Munter, director of registration and inspections, is also leaving at the end of May (see PCAOB inspection head Helen Munter steps down). Since the beginning of the year, the PCAOB has installed a completely new board, with a new chairman, William Duhnke, and four other new members. Duhnke also said in his first speech as the PCAOB chairman Monday that the PCAOB is planning to make big changes in its oversight of the audit profession.
Baumann has worked at the PCAOB for 12 years and has been chief auditor since 2009. He has worked to set and interpret standards for audits of public companies and oversaw landmark standard-setting projects in recent years, including an overhaul of the audit reporting model.
“Marty has made an important and valuable contribution to the work of the PCAOB and the protection of investors in U.S. markets,” Duhnke said in a statement Tuesday. “We are grateful for his service.”
Before joining the PCAOB, Baumann worked for three years as executive vice president of finance and CFO of the Federal Home Loan Mortgage Corporation, also known as Freddie Mac, where he was responsible for accounting and reporting, corporate planning, taxation and capital management. Prior to that, he spent 33 years at Big Four firm PricewaterhouseCoopers, including as partner, global banking leader and deputy chairman of the Global Financial Services Practice.
“It has been a great privilege to be a part of the PCAOB for the last 12 years,” Baumann said in a statement. “Working with the board, and the hardworking and creative staff in the Office of the Chief Auditor and throughout the PCAOB, I am honored to have played a part in setting standards that focused on improving audit quality and protecting investors.”
During a speech Monday at a Deloitte auditing symposium at the University of Kansas, Duhnke referred to the extensive changes at the PCAOB. “I had the pleasure of joining the board in January, along with my fellow board member Kathleen Hamm,” he said. “In February, Jay Brown joined, and Jim Kaiser followed in March. Finally, early last month, our last board member, Duane DesParte, arrived on board.”
Duhnke noted that the PCAOB is taking a different approach than usual in its strategic planning process, pointing out that the board is “no longer in its infancy.”
“We have reached a relative state of maturity,” he said. “With that maturity comes an opportunity to consider where the journey has taken the organization and where the PCAOB should be headed in the future. As an organization, we cannot simply stand on our prior successes and assume success will continue to come. We must, instead, take to heart lessons learned over the past 15 years and set a clear vision to guide us towards sustained success in the years to come.”
The PCAOB is looking to get more input from the outside into its strategic planning for the future and to change its inspection process and reports, according to Duhnke. He acknowledged improvements in audit quality as a result of the board’s work, but said some firms "appear to have ‘plateaued’ in their progress toward achieving improved inspection results.”
“Therefore, now is an excellent time for us to consider the potential reasons for those plateaus, including considering the continuing effectiveness of our current inspection approach in driving further improvement in audit quality,” he added.
Duhnke pointed to approaches taken by the Financial Reporting Council in the United Kingdom and the Dutch Authority for Financial Markets to inspecting auditing firms by doing "thematic reviews," and indicated the PCAOB might follow suit.