A letter sent by two senators addressed to Securities and Exchange Commission Chairman Jay Clayton critiques the regulator’s oversight of the Public Company Accounting Oversight Board as showing “questionable judgment and an alarming lack of transparency.”
Sherrod Brown (D-Ohio) and Jack Reed (D-R.I.), both members of the Senate Banking Committee, sent the letter, published by Bloomberg Tax, on Oct. 17 in the wake of a Wall Street Journal report detailing whistleblower allegations against the PCAOB, which falls under the SEC’s jurisdiction. The WSJ report cites an eight-page whistleblower letter sent to the SEC in August that states the PCAOB is “permeated by a sense of fear,” due to “the numerous terminations … [some] driven by retaliation.”
The whistleblower letter was reportedly written by a group of current and former PCAOB employees.
“It appears that the Commission believes additional oversight of the PCAOB is necessary. Given the whistleblower letter, concerns about oversight, and other issues highlighted in the Journal article, we agree,” the senators wrote to Clayton. “Now it is incumbent on you as Chair to explain how you determined that need and describe how such oversight will be conducted.”
Scrutinized by the senators was the SEC’s appointment of former Chairman Harvey Pitt to review the PCAOB’s governance and announcement Commissioner Hester Peirce will lead the SEC’s coordination efforts with the PCAOB. The choice of Pitt, whose tenure as Chair was wrought with controversy, “seems unwise,” the Senators wrote while adding Peirce’s new role “is troubling because it displays an alarming lack of transparency and raises the potential of undue influence on the Board of the PCAOB.”
“Although Section 107 of the Sarbanes-Oxley Act provides that ‘the Commission shall have oversight and enforcement authority over the Board,’ Congress did not mandate a single SEC Commissioner to have the role of ‘coordinator,’” Brown and Reed wrote. “Furthermore, Commissioner Peirce was a longtime colleague of current PCAOB Chairman William Duhnke, which also raises questions about her selection for this role.”
Controversy is nothing new at the PCAOB, which overhauled its entire board in a stunning move just last year. Less than two weeks ago, the SEC appointed White House aide Rebekah Goshorn Jurata to the Board to replace Kathleen Hamm, who had publicly expressed her desire to continue in her role for a second term.
The PCAOB was also recently called out by a government watchdog for its lax enforcement history.
The senators seek response to eight questions by Clayton, six of which are focused on further clarity regarding the roles of Pitt and Peirce. The others aim to determine when Clayton was made aware of the whistleblower letter and what the SEC’s process for oversight of PCAOB staffing adequacy entails.
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