The Securities and Exchange Commission has named Jeanette M. Franzel, a managing director of the Government Accountability Office, as a member of the Public Company Accounting Oversight Board.
She will be replacing Daniel L. Goelzer, one of the founding members of the PCAOB, who has served two consecutive five-year terms with the PCAOB since the board was founded in 2002.
The Sarbanes-Oxley Act of 2002 created the PCAOB to provide independent oversight of audits of public companies and broker-dealers. The board is responsible for setting audit standards and for registering, inspecting, and disciplining public accounting firms. The SEC oversees the PCAOB and appoints its members.
Franzel currently leads all aspects of the GAO’s financial audit oversight of the federal government. She heads a team of approximately 250 staff that focuses on financial and performance audits, proper use of federal funds, internal control, financial systems, and federal audit and financial management policy. She is a CPA, Certified Internal Auditor, Certified Management Accountant, and Certified Government Financial Manager.
“Jeanette’s commitment to the public trust and America’s investors is demonstrated by her life-long public service and her constant dedication to increasing accountability, audit quality and audit standards,” said SEC chair Mary L. Schapiro in a statement. “She has extensive hands-on experience leading financial audits and deep expertise in audit quality control, which will serve the PCAOB well as it continues to execute a rigorous standard-setting, inspections, and enforcement agenda.”
However, one of the SEC commissioners, Luis Aguilar, dissented and declined to approve the appointment. "My objection to this appointment is based on the fact that the Commission must appoint individuals who have 'demonstrated commitment to the interests of investors,' This is not the case here," he said. "Although the appointee is an experienced government auditor, and I appreciate her years of service, there is nothing in the evidentiary record that reflects a commitment to the interests of investors, or a history of advocacy for investor rights. I believe the Commission is bound to appoint an individual whose actions, public statements, and reputation demonstrate a clear and steadfast advocacy of the rights and interests of investors."
Franzel received statements of support from others at the SEC, the PCAOB, and elsewhere, though. “We look forward to working with Jeanette on the PCAOB’s important statutory mission of overseeing the auditors of public companies and SEC-registered broker-dealers,” said SEC chief accountant James L. Kroeker. “Her qualifications as a nationally and internationally recognized expert in auditing standards will benefit the PCAOB as it works to protect the interests of investors and strengthen audit quality.”
"Jeanette’s extensive experience in the field of securities regulation and auditing standards will enable her to hit the ground running," said Doty. "I am delighted to have her join the board."
"Jeanette will be an excellent advocate for the investing public because of her strong focus on wringing financial fraud from the system, which was a primary part of her responsibilities with the GAO," said Brian Fox, founder of the audit confirmation service Confirmation.com, who met with Franzel while working with the GAO on updating audit confirmation standards.
Franzel and University of Tennessee accounting professor Joseph Carcello were considered to be leading contenders for the PCAOB board member opening. However, Carcello was reportedly perceived as more openly critical of the leeway that auditors give financial statements and he co-signed a letter last year calling for changes in auditor reports, an initiative that PCAOB chairman James Doty has also championed (see Next PCAOB Board Member Could Tip Balance of Board). He has also backed another PCAOB proposal for the lead partner on an audit engagement to sign the audit report.
Franzel, on the other hand, signed a GAO report back in 2003 that recommended against mandatory audit firm rotation, a proposal that the PCAOB is now considering. But she has also been critical of new auditing standards on how auditors should respond to risk.
Franzel received her bachelor’s degree from the College of St. Teresa and holds an M.B.A. from George Mason University. “I am honored to continue serving the public interest in my new role as a member of the PCAOB," she said. "I look forward to advancing the agenda to strengthen investor protection through high-quality audits of public companies and broker-dealers.”
Franzel is replacing Goelzer, who led the PCAOB as interim chairman from August 2009 to January 2011 after former chairman Mark Olson stepped down, until Doty was appointed chairman.
“I would like to thank Dan Goelzer for nearly a decade of service at the PCAOB and for continuing to serve while the search for a new member of the board was underway,” said Schapiro. “I wish him the very best in his future endeavors.”
The PCAOB board and staff also thanked Goelzer for his service, noting that he shepherded the organization through a challenge to its constitutionality in the U.S. Supreme Court, while ensuring that the board continued to carry out its mission to protect investors and promote public confidence in audited financial reporting.
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