Securities and Exchange Commission Chair Gary Gensler on Friday removed the head of the Public Company Accounting Oversight Board (PCAOB) while also announcing plans for a broader overhaul of the organization’s leadership.
Gensler removed William Duhnke III with immediate effect, replacing him with acting chair Duane DesParte. Duhnke had held the position since January 2018. The SEC further announced it would seek new candidates to fill all five board positions at the PCAOB, with the Office of the Chief Accountant to lead the search.
A spokesperson for the PCAOB directed all media inquiries on the announcement to the SEC.
“The PCAOB has an opportunity to live up to Congress’s vision in the Sarbanes-Oxley Act,” Gensler said in a press release. “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.”
DesParte, a CPA, joined the PCAOB in April 2018, after retiring from his post as corporate controller for Exelon Corp. Before Exelon, he had an 18-year career in the audit assurance profession.
With Duhnke’s removal, the PCAOB has two vacant positions; member J. Robert Brown stepped down in January. The Board currently consists of DesParte and members Rebekah Goshorn Jurata and Megan Zeitsman, who were both appointed by former President Donald Trump. Their terms run through 2023, 2024, and 2025, respectively.
The PCAOB regulates audits of public companies and brokers and dealers through registration, standard setting, inspection, and disciplinary programs. Under Sarbanes-Oxley, the SEC selects members and the chair.
In 2020, Trump proposed folding the PCAOB into the SEC by 2022, which would have made the organization a department of the SEC rather than keeping its current position as an independent watchdog. The proposal was resisted by Democrats in Congress and was ultimately stripped from the version of the budget that was approved.
In a recent lawsuit filed against Duhnke and the PCAOB, the agency’s former chief risk officer said Duhnke called the PCAOB a “frivolous organization” that he felt should be combined with the SEC. Sue Lee claimed she was fired as part of a “racist and xenophobic campaign” against her by Duhnke that was based on “her Asian ethnicity, Chinese national origin, and political affiliation with the Democratic Party in violation of the D.C. Human Rights Act.”
Lee is seeking back pay and damages as part of the lawsuit, which names both the PCAOB and Duhnke as defendants. A spokesperson for the PCAOB called Lee’s claims “baseless.”
Democrats and other progressives had been pushing the SEC to shake up the leadership of the PCAOB. One of those Democrats, Sen. Elizabeth Warren (Mass.), called the firing of Duhnke “absolutely the right move” in a tweet Friday.
“William Duhnke was a Trump crony who undermined the PCAOB’s work,” she wrote. “Our auditing process needs to be independent and with integrity. Let’s replace the other members with people who live up to the agency’s mission.”
Meanwhile, the SEC’s Republican commissioners, Elad Roisman and Hester Peirce, voiced their “serious concerns” about the actions taken by Gensler in a statement Friday.
“These actions set a troubling precedent for the Commission’s ongoing oversight of the PCAOB and for the appointment process, including with respect to attracting well-qualified people who want to serve,” they wrote. “A future in which PCAOB members are replaced with every change in administration would run counter to the Sarbanes-Oxley Act’s establishment of staggered terms for Board members, inject instability at the PCAOB, and undermine the PCAOB’s important mission by suggesting that it is subject to the vicissitudes of politics.”