New leadership will soon take over the helm of the Public Company Accounting Oversight Board after Jay Clayton, chairman of the Securities and Exchange Commission, has opened a public search for as many as four board positions.
The search will mean the departure of PCAOB Chairman James Doty, whose term expired in 2015 while Mary Jo White was still chair at the Securities and Exchange Commission under the Obama administration. Doty has continued to serve past his term without reappointment.
It also will include the seat left vacant when Jay Hanson abruptly resigned at the end of 2016. It might also displace Jeanette Franzel, another board member who has continued serving past her term expiration, and perhaps even Steve Harris, whose term expires later in 2017.
In a prepared statement, SEC Chairman Jay Clayton said Doty will remain in place while the SEC searches for his successor. “I believe this will ensure the continued execution of the PCAOB’s mission as the PCAOB transitions to new leadership,” he said.
Doty has earned a reputation as a dogged audit regulator since his appointment as PCAOB chair in 2011. Audit inspections became more rigorous under his leadership, turning out high rates of audit failures even among the leading audit networks. While Doty was not successful in driving term limits for audit firms as a means of trying to shake more professional skepticism and objectivity out of auditors, he has remained steadfast in his call on auditors to act more in the interest of investors than members of management.
Following the expiration of his term, Doty had said he would remain chair of the PCAOB until he was asked to leave. In a recent statement, he renewed that sentiment. "I remain deeply committed to the important mission of the PCAOB and the staff who carry out that mission every day,” he said. “I am pleased that Chairman Clayton has asked me to continue to serve as Chairman as the SEC commences its process.”
Calling Doty a “consummate public servant,” Clayton lauded Doty’s accomplishments at the PCAOB while also opening a search for his replacement. Clayton credits Doty with enhancing the board’s inspections in a way that has improved audit quality, advancing major standard-setting initiatives, increasing the use of economic analysis in setting standards, and expanding cooperation with international counterparts to increase the U.S. regulatory reach into audit firms abroad.
Under the Sarbanes-Oxley Act, which established the PCAOB, the board is made up of five members, two of whom must be certified public accountants and three of whom may not be CPAs. They are to serve staggered five-year terms.
Currently, one seat is vacant, two are held by members whose terms have expired, and one will soon expire, leaving only Lewis Ferguson with a certain seat after the SEC’s current selection process is complete. While Clayton addressed the departure of Doty, he did not say whether the SEC might consider reappointing Franzel. Harris cannot be reappointed because he is finishing his second term.
The SEC says anyone meeting the statutory requirements under Sarbanes-Oxley who wants to be considered for a position should submit a cover letter and a resume or curriculum vitae by Sept. 1.