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Duhnke Removed From PCAOB, SEC Now Seeks New Chair

Chris Gaetano
Published Date:
Jun 7, 2021
PCAOB 240x240

William D. Duhnke III, who had served as the chair of the Public Company Accounting Oversight Board since 2017, has been removed from the organization entirely by the Securities and Exchange Commission, which is now seeking a new chair. Duane M. DesParte will serve as acting chair, effective immediately.

"The PCAOB has an opportunity to live up to Congress's vision in the Sarbanes-Oxley Act," said SEC Chair Gary Gensler. "I look forward to working with my fellow commissioners, Acting Chair DesParte, and the staff of the PCAOB to set it on a path to better protect investors by ensuring that public company audits are informative, accurate, and independent."

The SEC gave no reason for the removal, but it comes on the heels of a group of progressive organizations sending a letter to SEC Chair Gary Gensler, calling for him to clean house and remove the entire board, followed by a letter from Sen. Elizabeth Warren (D-Mass.) and Sen. Bernie Sanders (I-Vt.) calling for the same. Both letters argued that the board overall has strayed from its purpose, saying that there has been a collapse in enforcement action, a weakening of auditing standards and a dearth of outside engagement due to the shuttering of important advisory bodies. The senators' letter also mentioned the departure of senior staff, and an overall "sense of fear" that has taken hold in the organization, largely due to the chairman.

The complaints are similar to those raised by former board member J. Robert Brown. In October 2020, he launched a wide-ranging critique of the board's activities thus far: he assailed its research and standard-setting agenda as lacking innovation and ignoring investor needs, as well as the organization's lack of transparency, pointing to the fact there had been no meetings of the Standing Advisory Group or Investor Advisory Group since 2018.

Just one month afterward, he was the sole dissenting vote on the board's budget, strategic plan and a change to its independence rules. On the budget, he said it failed to sufficiently  fund mission-critical sections such as the Office of the Chief Accountant, and also that it had inadequate cash reserves, just five months' worth. On the strategic plan, Brown said it failed to take into account the changes to the auditing landscape, as he believed that this plan was substantially the same as it was five years previously, when it was last updated. On the changes to the independence rules, which narrows the types of relationships between an auditor and an audited entity that would constitute an independence violation, Brown said that this amounted to ceding away much of the PCAOB's distinct and separate authority over independence standards. He also disliked how the new rules allowed audit firms to engage in an expanded set of services to some affiliates of their audit clients and to allow certain "inadvertent" violations of auditor independence requirements. Much of his ire, though ,was aimed at the lack of transparency in the process at all.

Brown announced in January that he was leaving the PCAOB.

Citing a 2019 whistleblower letter purporting to be from a group of current and former employees, Bloomberg Businessweek  added that Duhnke was also the target of numerous complaints from rank-and- file workers. The letter charged that he was behind a rash of firings when he first came in and that he walled off his office suite away from staff. In addition, a wrongful termination suit brought by the PCAOB's former chief administrative officer accused him of targeting Democratic staff members and using racial slurs when speaking of COVID-19. Duhnke not only denied the accusations, he filed a complaint of his own against the former CAO, accusing her of expensing personal items.

Bloomberg also reported that three different people said that Duhnke, at a meeting in October 2019, threw an empty soda can at Brown and then, afterward, tried to physically prevent him from leaving the room. Brown said that wasn't what happened (without offering further explanation), while Duhnke denied anything happened at all.

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