William D. Duhnke III is Chairman of the Public Company Accounting Oversight Board (PCAOB). This post is based on his recent testimony before the U.S. House of Representatives Committee on Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets as part of a Hearing on “Overseeing the Standard Setters: An Examination of the Financial Accounting Standards Board and the Public Company Accounting Oversight Board.”
Chairman Sherman, Ranking Member Huizenga, and distinguished members of the subcommittee, thank you for the opportunity to appear before you today to discuss the important work of the Public Company Accounting Oversight Board (PCAOB). [1]
I joined our five-member board in early 2018, along with four other new board members. Not since the PCAOB was first founded in 2003 have five new Board members joined the organization at roughly the same time. With such a significant change in the Board’s composition, came a significant opportunity. We had the chance to reflect on lessons learned over the prior 15 years, to innovate, and to improve how we approach audit oversight.
In 2018, we used the opportunity to perform a comprehensive assessment of the PCAOB. To help our assessment, we engaged in significant public outreach. We sought input from our core stakeholders on what we were doing well, what we needed to improve, and how we could best improve audit quality. We heard from the SEC, investors, audit committees, financial statement preparers, audit firms, academics, and others. The message we received back was loud and clear: The PCAOB was ripe for change. The PCAOB had, in many respects, lost the public’s trust. The organization was out of touch with market developments and stakeholders’ needs. It had not matured significantly since opening its doors in 2003. During that time, it developed a culture that lacked internal accountability. And, its integrity had been compromised in 2017 by employees leaking confidential inspections information to those we are charged to regulate.
