Cydney S. Posner is special counsel at Cooley LLP. This post is based on a Cooley memorandum by Ms. Posner.
Yikes! What is going on at the PCAOB? You may recall that, back in 2018, former staffers at the PCAOB and former partners of KPMG were charged by the SEC in connection with “their participation in a scheme to misappropriate and use confidential information relating to the PCAOB’s planned inspections of KPMG.” You know, that case where the former PCAOB staffers were accused of leaking to KPMG the plans for PCAOB inspections of KPMG—“literally stealing the exam.” (See this PubCo post.) The same scheme led the U.S. Attorney’s Office for the SDNY to file criminal charges against the former staffers, and some have actually been sentenced to prison. But that’s not even the half of it.
As reported by the WSJ, the PCAOB “has slowed its work amid board infighting, multiple senior staff departures, and allegations that the chairman has created a ‘sense of fear,’ according to a whistleblower letter and people familiar with the situation….The regulator has issued 27% fewer audit-inspection reports this year, board data show, as senior staff positions remain unfilled for months.” What’s more, that same whistleblower complaint— submitted by a group of employees to the board in May and to the SEC in August—precipitated the appointment of Harvey Pitt, former SEC Chair, to review “PCAOB corporate governance.”